Future of retirement
What will the future of retirement look like?
Whatever picture of retirement you might conjure up in your mind, the chances are that the reality is going to be very different when the time actually comes. In recent years, the whole notion of retirement has been through a sea-change – in the future it is likely to have changed still further.
Indeed, some have argued that we are entering a world in which there may be no retirement at all. Let’s see why that prophesy may not be so outlandish as it sounds.
One of the principal reasons is counter-intuitive. We are all living longer. Figures published by the Institute and Faculty of Actuaries, reveal that a man now aged 65 can expect to live an average of a further 22.2 years (to age 87.2) and a woman of 65 a further 24.1 years (to age 89.1). Increased longevity might suggest more years in retirement and not fewer.
The crunch comes, of course, in the fact that increased longevity means that more income is needed to pay for those years.
Despite the need for more savings to support a longer retirement, the amount being put into savings and retirement plans on average across the working population of the UK is currently unlikely to fund a completely work-free retirement in the future.
State retirement age
Probably the most obvious statement of this disparity between longevity and the extra money needed to pay for retirement appears in the steadily rising state pension age.
Throughout most of the 20th century men expected to need to work until the age of 65 before qualifying for a state pension and women to the age of 60. This state of affairs continued until the year 2010, when these milestones started to rise for increasing numbers of people so that by 2020 the state retirement age will be age 66 for both sexes.
In 2029, the government has already announced that the state retirement age will rise further to 67 – but further increases in that ceiling are likely to follow. By the 2060s, for example, many commentators forecast that people will still be working when they are in their 70s and many will need to work well into their 80s, just to achieve real incomes the equivalent to those of their parents who retired at age 65.
These trends are likely to see a marked increase in the number of people working part-time in order to top up any private and state pension arrangements they may have made.
This might be fine whilst they are healthy and fit enough to work on at least a part-time basis, but will naturally become more and more difficult as they grow older.
Some employers are already drawing on the advances made in technology and automation to reserve physically and mentally less demanding work for older employees.
This leaves any 16 year-old just entering the labour market facing the prospect of having to work for the next 50 or 60 years of their lives.
Faced with this future, it is possible that many of them will take time out from their working lives throughout that period – “retirement” is not just something saved for old age, but in fact becomes a more or less regular and ongoing experience at various stages in their lives.
The future of retirement, therefore, may be no retirement as we now know it, but a series of time-outs throughout a much longer working life.