The pandemic is wrecking millions of older workers’ retirement dreams as crashing stock markets and a wage slump make it impossible for them to give up work, the Institute for Fiscal Studies (IFS) has warned.
Huge numbers of pensioners could find themselves significantly worse off than planned in retirement, the IFS said, following a plunge in share prices which has wiped 22pc off the FTSE 100 since the start of the year.
A third of older people say they are worse off as a result – while 8pc have said they will be forced to push their retirement date back.
There were 10.7m over-50s in work before the pandemic struck, according to the Office for National Statistics, suggesting as many as 850,000 could delay retirement if the survey reflects this age group.
Meanwhile, 5pc are planning to retire sooner than expected. Although this group encompasses some richer households, it also includes may workers who have given up hope of returning to their job after being put on the taxpayer-funded furlough scheme, which is ending next month.
Almost a quarter of older workers have been furloughed, and 15pc of workers in the age group think their job is unlikely to return after the pandemic.
Rowena Crawford, of the IFS, said: “The current pandemic risks having serious and long-term financial consequences for older workers, affecting living standards into and through retirement.
“Those on furlough are now more likely than those working to be planning to retire earlier and it will be important to monitor that this does not represent a rise in involuntary retirement among people discouraged from finding new work.
“On a positive note, those working from home are now more likely to be planning to retire later; suggesting changes to work practices could benefit some older workers.”
Many workers will be in trouble if the value of their investments has fallen, with little time before retirement to make up the lost ground.
More than half of older workers have a defined contribution pension, where their savings are invested in the stock market and the amount of money they get on retirement depends on its performance. Workers who are due to retire shortly after a crash could suddenly be left with a far smaller pot than expected as a result.
Meanwhile those with the least money and the most need to work are at risk from shorter hours, job losses, or medical conditions which leave them vulnerable if heading out to work in a pandemic.
Almost a third of over-52-year-olds in work before the pandemic said their financial situation has worsened, according to the IFS. The same is true of 13pc of retirees.
Industry leaders have warned that more than a million jobs could disappear in the coming months across the leisure and events sectors as the furlough scheme is replaced with a new programme that requires employers to pay more, and workers to come back for at least a third of their normal hours.
It can be difficult for older workers to find new jobs, potentially pushing more into retirement sooner than they hoped, while undermining their finances.
The Office for National Statistics found that younger workers lost their jobs faster than other age groups in the early months of the pandemic, indicating the negative financial effects of Covid-19 are spread across large swathes of the population.
Emily Andrews at the Centre for Ageing Better called for help to keep older workers in employment.
She said: “It is deeply worrying to see many people now planning to retire earlier than they intended – including many who are currently on furlough. That’s OK where it’s a positive choice, but for many it won’t be and will leave them poorer or in financial difficulty in later life.
“We know that once out of work, over-50s struggle more than any other group to get back into employment, and we must not let a generation of older workers write themselves off prematurely.
“In addition to the kickstart scheme for younger workers, we need to see targeted support for over-50s to get back into work, retraining opportunities for over-50s, and a strong message from government that over-50s are just as entitled to jobs as younger workers.”
The warning came as Bank of England Governor Andrew Bailey said the pace of the economy’s recovery will slow after a stronger-than-expected third quarter.
He warned greater consumer caution will continue as a second wave strikes the UK but added that the economic hit from the new Covid-19 restrictions will be much less severe than the national lockdown earlier this year.
Speaking at an online event hosted by Queen’s University Belfast, Mr Bailey said: “We did see a very rapid downturn and very rapid recovery, but our best guess is that will slow down now that pace of recovery and that was even before we saw the recurrence of Covid.”
Output remains 7pc to 10pc below pre-virus levels, he added.
