- Employment levels among over 50s rose marginally again at the end of 2022 as inflation tightened its grip on UK households (A01: Summary of labour market statistics - Office for National Statistics (ons.gov.uk))
- More than 200,000 additional over 50s are now in work compared to the pandemic-induced lows of early 2021
- However, employment levels among over 50s remain below pre-pandemic levels
- Addressing barriers to over 50s returning to work likely to be a key feature of next month’s Budget
Tom Selby, head of retirement policy at AJ Bell, comments:
“With the UK expected to flirt with recession throughout 2023, Chancellor Jeremy Hunt will have a keen eye on indicators of economic performance ahead of his March Budget.
“One area of weakness already identified by the Government is the labour market, with a DWP review looking specifically at how older people can be mobilised to return to the workforce – and any blocks or disincentives that might exist.
“On this front, ministers will undoubtedly be pleased with the most recent figures. There were around 150,000 more over 50s in employment at the end of 2022 compared to the start of the year, and more than 200,000 more than the low we saw in early 2021. While it is hard to pinpoint exactly what is driving this, the rising cost of living will inevitably be a significant factor for many.”
Addressing pension tax issues
“Recent reports suggest the Treasury is considering relaxing the pensions lifetime or annual allowance limits – or both – with the aim primarily of easing pressures on the NHS.
“While any increase in pension allowances would be welcome after over a decade of persistent cuts, it is the ‘money purchase annual allowance’ (MPAA) that is more likely to punish savers who return to work in the private sector.
“Anyone who flexibly accesses taxable income from their retirement pot from age 55 onwards has their annual allowance reduced from maximum of £40,000 to just £4,000 by the MPAA. They also lose the ability to ‘carry forward’ unused annual allowances from the three previous tax years.
“Imposing the MPAA at such a low level acts as a direct disincentive to return to work for those who have accessed their pension flexibly and plan to continue saving for retirement. It also risks leaving those who have been forced to access their pension during a period of severe financial strain hamstrung as they attempt to rebuild their fund.
“Increasing the MPAA to £10,000, the same level at which it was originally introduced, would at least give older workers a bit more freedom to save for retirement. Over the medium-term, there is a strong case for the Government to explore ditching the MPAA altogether.”
Source: AJ Bell analysis of ONS data
