AJ Bell press comment – 13 September 2022
- Employment levels among over 65s dipped slightly between May and July but remain substantially higher than at the start of 2022, new ONS figures show
- There were around 1,418,000 over 65s in work between May and July, down from 1,468,000 between March and May (A01: Summary of labour market statistics - Office for National Statistics (ons.gov.uk))
- Despite the fall, the latest figure is still around 124,000 higher than at the start of 2022
- Surge in employment among over 65s this year has been driven by increases in part-time work, separate ONS analysis suggests – with the rising cost of living one potential factor (People aged 65 years and over in employment, UK - Office for National Statistics (ons.gov.uk))
- Big question is whether those who have returned to work will remain in work now Prime Minister Liz Truss has confirmed energy bills will be capped
Tom Selby, head of retirement policy at AJ Bell, comments:
“Employment levels among over 65s hit record levels between March and May this year, with the surge largely attributed to people taking on part-time work. Industries such as hospitality, where informal employment is more common, have seen some of the biggest increases in employment among over 65s in 2022.
“In the latest period between May and July, the number of over 65s in work slipped back by around 50,000 to just over 1.4 million, which remains close to record levels and roughly the same number in employment as before the pandemic hit.
“The reasons behind the 2022 rise in employment among older people remain unclear, although the spike in inflation we have seen recently – coupled with expectations of spiralling energy bills – will likely have been a major factor.
“Given the very strained economic circumstances millions of households are facing, some of those returning to the workforce will inevitably have felt forced into the decision. Others will have been happy to pick up some extra hours and might enjoy working, possibly on a part-time basis, while taking an income from their pension.
“Prime Minister Liz Truss’ decision to freeze energy bills should mean some of those who felt forced to return to work as inflation raised its ugly head might either reduce hours or stop work altogether. However, this will depend in part on the impact the freeze has on the cost of living in the wider economy.”
Source: ONS
The challenge of inflation for retirement incomes
“One of the major challenges posed by inflation is the impact it has on people’s spending power in retirement.
“While some retirement incomes, such as generous defined benefit pensions offered by the public sector, offer total inflation protection, most do not.
“Anyone who is taking a flexible income through drawdown will need to consider whether they increase their withdrawals in line with rising prices, potentially putting pressure on the sustainability of their plan, accept a real-terms cut in living standards, or, as the ONS stats suggest some have done, secure an additional income to supplement their pension.
“Those who bought flat-rate annuities will likely be among the people feeling the pinch the most, but even ‘escalating’ annuities tend to have a cap applied to increases which limits the protection offered, particularly during periods of ultra-high inflation.
“Even the state pension, which in theory is protected by the ‘triple-lock’, has fallen in value in real terms as a result of this year’s increase being pegged to September 2021’s inflation figure of 3.1%.
“Taking all this into account, it is little surprise many over 65s have felt the need to work in order to bolster their retirement incomes.”
