Voice of the Employee

Aviva is calling for the government to enable a phased approach to retirement. Millions of UK mid-life employees (32%, the equivalent of 4.5 million1) believe they may not have enough money to retire when they choose.

Flexible withdrawals of the state pension2 from the age of entitlement would remove the “all or nothing” choice faced by millions of workers, allowing people to claim “some” of their state pension from their state pension age. The unclaimed amount would then increase in line with traditionally deferred state pensions.

However, with increased flexibility and choice comes an ever-greater need for guidance and advice. Currently, consumers do not, or cannot, access regulated financial advice which means they are acting alone, hoping for the best. This needs to change.

With the state pension providing the largest single source of income in retirement for the average pensioner, it is central to the plans of many3, but it also acts as an artificial line in the sand for millions of workers.

The age at which people can access their state pension is rising. Together with a shift towards defined contribution schemes, it means almost half (49%) of UK employees aged 45+ are considering working for longer or are already working beyond the state pension age4.

Aviva’s report The UK’s Mid-Life Workforce: navigating uncharted waters which launched today calls on government and industry to see investment in mid-life employees as a “need to do” rather than a “nice to do”.

The median age of the UK population has risen from approximately 34 to 41 over the past 40 years5, a trend reflected in the UK workforce. Today, there are more than 10 million people over the age of 50 in work – a record high6.

A more flexible approach to withdrawals of the state pension not only benefits individuals but also businesses, by allowing firms to capitalise on the talent and experience of these employees for longer. Aviva’s research reveals that 72% of employers are experiencing challenges in recruiting workers. Supporting mid-life employees is an essential response to this shortfall7.

Lindsey Rix, CEO UK Savings and Retirement* at Aviva comments:  “There are several actions the government and employers could consider to better support workers in the 45+ age group. We believe the choice between claiming 0% or 100% of the state pension no longer reflects our increasingly flexible working lives and we are calling on the government to allow individuals to make flexible withdrawals from their state pension when they reach their state pension age.

“As a leading provider, we are also committed to helping deliver better help and support for customers. We want to work with the government and regulators to make sure that suitable advice is accessible and affordable for the majority, within a properly regulated framework.

“The number of mid-life employees continues to grow to unprecedented levels. Aviva has learnt a huge amount about the challenges and opportunities facing this population from the delivery of our Mid-Life MOT programme. Our report shows there is a huge demand for a fuller working life amongst those aged 45+. However, we believe the state pension age acts as an artificial ‘hard line’ in the working lives of many. If we fail to prepare for an ageing workforce, the consequences will be damaging for generations to come. Not only could we see an increase in poverty in retirement; but also, a greater strain on our working population and a UK restricted from investing in its future as it struggles to navigate its present.”

Aviva advocates the following five actions to help support the 45+ age group:

  1. State pension flexibility: The default retirement age was abolished in 2011, stopping employers from compulsorily retiring workers once they reached the age of 65. This is welcomed; however, the state pension age continues to act as an artificial “hard line” in the working lives of many. Aviva calls upon the government to allow people to make flexible withdrawals from their state pension from their state pension age.
  1. The advice gap: There are more people saving for retirement than ever before, but individual responsibility for financial planning is also greater than ever before. A minority of people have confidence in planning for their future, yet the vast majority do not, or cannot, access regulated financial advice. This means millions are acting alone, hoping for the best. Aviva calls upon the government, the regulator and all concerned to redouble their efforts to close the UK’s advice gap.
  1. Government co-ordination: The government’s industrial strategy gives focus to the “grand challenges” facing the UK, including ageing. Responsibility for enacting age-related recommendations is currently fragmented across many government departments. In the area of a longer working life it is being positively led by the Department for Work & Pensions. However, greater cross-governmental co-ordination could drive greater results. We encourage the government to consider Japan’s approach to this challenge with its creation of a single government lead for ageing in society.
  2. Employer incentivisation: Aviva’s experience evidences the business benefits of age-related investments such as the Mid-Life MOT. Discussions, however, indicate that a minority of employers are yet to prioritise this commitment to their ageing workforce.  Aviva calls upon the government to use the tax system (via reliefs or deductibles) to incentivise age-related investments by employers.
  3. Unleashing technology: Seven-in-10 adults regularly use the internet for banking, yet only one-in-10 use it to manage their longer term “investment services” like pensions. The potential for the internet to help people embrace their longer lives is huge and untapped. The pension dashboards will bring online pensions to millions. Aviva calls upon all dashboards to include an educational hub that directs the user towards the educational services of the Money and Pensions Service and the Department for Work & Pensions online Mid-Life MOT.

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