Why part-time retirees could be working into their 80s

PENSION savers hoping to retire gradually may be forced to work into their late 70s and beyond to get the lifestyle enjoyed by previous generations, a report warns.

Former pensions minister Sir Steve Webb said the idea of flexible retirement – switching to part-time employment before giving up work entirely – could be just a ‘mirage’ if savers add only minimum amounts to workplace pension pots.

Sir Steve, now a director of pensions firm Royal London, said an average worker wanting a ‘gold standard’ retirement – where income is two-thirds of preretirement levels – as well as a gradual cut to their hours, may have to work until they are 79 before they can fully retire.

Targeting a ‘silver standard’ – where income is around half pre-retirement levels – could mean having to work to the age of 69, Royal London calculated.

The scenarios are based on saving at the legal minimum, taking a state pension as soon as possible and moving to part-time work by halving previous hours.

Royal London said those wanting protection against inflation and support for a widow or widower could be working into their 80s. Sir Steve said: ‘A flexible retirement is likely to be a mirage for millions of

‘Cannot afford decent living standard’

people based on current levels of saving.

‘Those who opt for a gradual retirement … could easily find themselves unable to afford to retire fully until their late 70s or beyond, unless they have built up a significant private pension pot.’

According to Royal London, nearly four million workers are saving at the minimum rates, and ‘cannot hope to ease their way gently into retirement’. The minimum combined contribution from worker and employer will be raised from 2 to 8 per cent of qualifying earnings by April 2019.

But the report added: ‘If we do not want to see a generation of workers who simply cannot afford to retire with a decent living standard … boosting contribution rates beyond the minimum 8 per cent must be addressed as a matter of urgency.’

A Department for Work and Pensions spokesman said: ‘We know that people need to save more which is why contributions will be increasing … we are reviewing the policy to see how it can go further.’