Fixed retirement age is outdated

The Department for Work and Pensions predicts that by 2050, there will be one working age person for every pensioner. In 1908, when the first Old Age Pension Act was introduced in the UK, this figure was 10:1 A combination of population and demographic changes, society, nature of contemporary jobs and financial constrains has caused governments and employers to question the sustainability of the pension and retirement model.

Time in employment is shrinking. Now, people are starting work later in life and opting into further education; at the other end, some firms are using redundancy programmes to release their employees into early retirement. Life longevity continues to rise. As a result, there is increased strain on national budgets and the loss of skilled workers who are fit to work can hamper business competitiveness.

Incrementally increasing the retirement age is more of a sticking plaster than a solution. Worldwide policies need to support individuals to extend their working lives, address the need for flexibility and overall change the way employers think of older aged people.

Studies into the differences between younger and older workers suggest that tasks that rely on speed, learning and problem-solving skills decline towards the end of working life. However, if these tasks rely on verbal skills and experience, there is less or no reduction. People reach high levels of professional vitality later in their career. In conclusion, the solution would be to enable a mix of ages in employment to improve overall organisational effectiveness and play on worker’s strengths.

Organisations that have been market leaders in introducing flexible retirement in the UK have seen an increase in the number of older workers targeting them for job opportunities thus gaining talented individuals with experience. However, as organisations respond to an older labour market, the situation becomes much more complex as each individual will have their own reasons for considering longer employment.

It is important to remember, however, that if individuals stay in employment for just an extra year, it saves the economy 0.79 per cent per individual pension – a major financial benefit at a national level. SJ

Yehuda Baruch, pictured, is professor of management at Southampton Business School. Professor Andros Gregoriou (University of Brighton) and Dr Susan Sayce (University of East Anglia) are co-authors