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New employment record for over-65s in the UK

For all the talk of recessions and rising inflation and interest rates, employment levels seem to be higher than ever. As of this summer, the UK unemployment rate sits at an estimated 3.5%
– the lowest it’s been since 1974.

This may be partially due to the fact that more people in the UK over 65 years old are either remaining in work or going back to work even after reaching retirement age.

Figures from the Office for National Statistics reveal that in the second quarter of 2022, the number of people in employment aged 65 or above increased to a record 1.468 million. The increase of 173,000 from the previous quarter was also a new record.

You may be wondering what exactly this means. Is it good or bad news for our ageing population that older people are working for longer? Will it become necessary for people over 65 to continue working instead of retiring when they reach State Pension age?

Here’s what you need to know about these record-breaking statistics, and what you should do if you’re worried about planning for retirement or continuing to work as a pensioner.

ONS reveals surge in over-65s in employment

The latest data shows that in the last ten years, employment among people aged 65 and over is up by around half, compared to overall employment rising by about a tenth in the same time period.

However, this senior workforce is predominantly made up of part-time workers, putting in fewer hours a week on average. During the period of April–June 2022, part-time employees in the 65+ age bracket increased by 17.7% (85,000), and part-time self-employed workers increased by 28.7% (76,000). Over-65s worked an average of 21.7 hours a week during this period.

The sectors that saw the largest increase in workers over 65 years old included hospitality, arts, and entertainment, while the most common sectors for over-65s to work in were health and social care, retail, motor repairs, education, and scientific and technical activities.

Why are so many over-65s still working?

With life expectancy increasing and the State Pension age being pushed back accordingly, it may not be surprising that people are choosing to keep working for longer.

However, the increase in over-65s working specifically part-time could be a clue that this age range is feeling the pinch of the cost of living crisis.

As inflation pushes up the prices of everyday goods and stock market slumps erode savings, it’s likely that pensioners are having to return to part-time work to top up an income that no longer stretches far enough to make ends meet.

This may seem like the end of the popular dream for many of retiring early, but this effect may be temporary as people reevaluate their finances and what they want from life.

According to the ONS data, most over-65s are finding part-time jobs or becoming self-employed in areas that suit them, allowing them to work as and when is best for their part-retired lifestyle. Over the coming years, it may be more common for people to opt for a ‘flexible retirement’ that balances working less with partially retiring.

Plan for retirement to make the most of your pension

According to an Over 50s Lifestyle Study by ONS, participants aged 60-65 years old were more likely to be debt-free, and 55% were confident that their retirement funds would be sufficient. However, among 50-54 year olds, participants were more likely to have debt, and only 38% had confidence in their retirement provisions.

If you’re around the younger age bracket and the thought of still working past 65 years old isn’t appealing, then it’s essential to make sure your retirement planning will provide you with the income you’ll need as a retiree/pensioner.

To help you with this, you can find information on the State Pension
on the government website, and guidance on private pensions and saving for retirement from Citizens Advice.

If you’re already working while receiving your pension, or plan to do so, you should also take potential tax traps into consideration. Anyone over 55 years old who has drawn money from a flexible-access pension while continuing to pay pension contributions through working will have triggered the Money Purchase Annual Allowance (MPAA).

The MPAA reduces the annual pension contribution allowance (the maximum you can save in your pension in a year before it becomes taxable) from £40,000 down to £4,000. This makes it much more likely that you’ll have to pay tax on your pension contributions.

If you have concerns about tax and retirement savings, why not engage our tax consultancy services at GBAC? Contact our team of accountants in Barnsley by phone or email today.