Using our heads to solve your Reward challenges.
We all know that the population is ageing - that is, that people are on average living longer than ever before and that the proportion of people over 65 years in the UK population is the highest that it has ever been.
In the 10 years between 2011 and 2021, the ONS (Office for National Statistics) reports that over 65s increased from 16.4% of the population to 18.6% and that is set to grow further.
At the same time, the over 50s are the fastest growing segment of the UK workforce, although a lot more attention seems to be on bringing younger people in to employment and meeting their needs.
There are now 11 million people in the UK aged 65 or above and over half a million age 90 and above. In 1961, The Queen sent out 479 100th birthday messages - in 2021 this was 13,924.
Ill health impacts both the type of work and the amount of work that we can do. CIPD data suggests that the percentage of the workforce age 60-64 impacted is twice that of those aged 40-44 at around 1 in 4.
Clearly that has significant implications for our economy, taxes raised, spend on healthcare etc. But what does this mean for Reward and our employees?
We know the benefits of diversity in terms of bringing different perspectives and more people into the workforce - and diversity of age is, or should be, right up there with gender, ethnicity, disability, neurodivergence and sexual orientation.
At Reward Heads, we have a well-spread demographic given we are knowledge workers and providing expertise and experience to our clients, so you would expect a high proportion of the team to be in older age groups - in fact 40% of our team are between 50 and 60.
So let's look at different parts of Total Reward and how we can both support our employees as they age - an inevitability for all - and enable us to recruit, retain and get the most out of this growing proportion of the workforce.
Pension
So this is the obvious place to start - once someone is no longer working and receiving income, how do they live? What other income do they need?
The PLSA (Pension and Lifetime Savings Association) estimate that each person needs around £14,400 per year to reach a minimum living standard, £31,300 for a moderate living standard and £43,100 to be comfortable. But note that this assumes that there is no housing cost, that people have paid off mortgages or are in social housing. However, a recent survey for the National Housing Federation noted that since 2010/11 the number of 55+ households in the private rented sector has grown by 70%, compared with a 20% growth in households in this age group overall. Nearly half (48%) of private rented sector tenants aged 65 or over are in the bottom 20% of all household incomes. So the cost of renting needs to be added for a significant number of people.
Also note that these figures are per year - and so pension pots need to be multiplied by life expectancy during the period of receiving the pension and suddenly the numbers can look very large - they estimate 25% more than average predictions for someone at the upper end of the life expectancy spectrum.
The current State Pension rises 8.5% to £11,502 in April 2024. That is below the bare minimum the PLSA says is needed. And so further income, most likely from a workplace pension, is critical.
If someone has a defined benefit pension, the 'extra years' risk is borne by the scheme. Most schemes are now not in deficit (although market shocks can change this) but it is critical that the right mortality figures are used for that population.
But many DB schemes have been closed to new entrants for a long time and many people in their 50s now will never have been in a DB scheme. In a defined contribution (DC) scheme the 'longevity risk' is borne by the individual, i.e., they need to make sure that there is enough in their pot for the rest of their lives.
We know that there is a Gender Pay Gap and an even larger Gender Pension Gap - the average pension pot for a woman is £69,000 and for a man is £205,000. Divide that by years of drawing the pension and it is not a lot.
The age at which it is possible to receive State Pension is increasing - it is already 66 and for those due to retire between 2026 and 2028 it will be age 67. There are already plans to increase this to age 68, and perhaps beyond. A recent study by the International Longevity Centre suggested that it will have to rise to 70 by 2040 to balance the public finances. Those of us in our 50s take note!
So what should employers do? The first and obvious point is to ensure that everyone is participating in a pension and understands the implications of opting out of autoenrollment. It is worth contributing through your 50s even if there is less scope for investment growth as (currently) there is the option to release up to 25% of the pension pot at age 55 tax free (NB this will increase to 57 from 2028 - another example of pension rules in constant flux). Like all things pension, this may change. Whilst you cannot and should not fall foul of discriminating on age by offering differing pension contributions by age, you can offer the option to up contributions from employers and employees to all and may discover that older workers find this more attractive.
And look at what is driving the Gender Pay Gap and Gender Pensions Gap. The former is driven by women not reaching senior positions as often as men, working in areas that command a lower market rate like care, teaching, retail and hospitality rather than finance, IT and banking and taking jobs below their expertise for flexibility. The latter exacerbates this as it is a percentage of salary, and even more impacted by fewer hours, time out of the workforce typically on maternity leave, and sometimes higher percentages for more senior roles.
Financial education is important for everyone and so providing access to this, whether directly about pensions or broader can be very valuable. Signpost employees to resources like the Government's Retirement Income Planner, MoneyHelper and PensionWise services as well as anything from your own pension provider - they will often provide pre-retirement webinars.
Training and ongoing work
The DWP is investing £22m in a midlife MOT to help over 50s retrain, find new careers, review finances and evaluate their health and wellbeing.
City and Guilds carried out at survey in 2021 to ascertain by age group who has undertaken formal workplace training in the last 5 years. Unsurprisingly for those in early careers, this was higher at 83% (15-35-year-olds). But for those age 55 and above, this was 53%. So almost half of those in this age group suggesting that either they or their employers did not feel it was worthwhile.
Those in their 50s and beyond can be a huge source of experience and talent especially in a knowledge economy. And there is evidence that they are less likely to leave a company than younger workers seeking to advance their careers.
CIPD research suggests that fewer hours are a key request of 'older' workers with almost 60% of workers 65 and over working part time and 38% of those 50-64, as is working from home and not commuting. CIPD's recommendation is for more choice of location and ability to work from home and for shorter working weeks or days. This is very much a trend across the workforce but seems to be even more a requirement for those over 50 and a key way of retaining that talent in the workforce.
The work content itself is also critical especially if employers are to make the most of that extra experience and knowledge. An Institute of Employment Studies (IES) study highlights that older workers particularly value:
In fact these would align well with 'good work' to minimise stress and promote good mental health for all employees.
From Reward Heads' perspective, we hope to capitalise on the skills, knowledge and experience of our team for a long time to come and so are constantly investing in building this throughout the team, tailored both to their needs and to areas of interest for them.
Healthcare
Older does not imply in poor health - let me tell you about my 86-year-old Mum who takes no medication and doesn't even wear glasses! But as we saw earlier, around 1 in 4 people in their early 60s and 1 in 5 people in their early 50s need to change the amount or type of work that they do owing to health issues. And many more will be struggling on without adjustments.
So how can employers help? Prevention is always better than cure so offering health assessments and funding check-ups (which can be done through low-cost health cashplans) can really help. Virtual GPs can give easier and faster access to healthcare where an issue is identified as, of course, can PMI (private medical insurance).
EAPs and access to services that support emotional wellbeing can also support as well as being proactive in healthy lifestyles - food apps, gym memberships.
Other Policies
And note that many people in their 50s are working whilst still having school age children, and many with elderly parents too. The so called 'sandwich' generation. Policies to help them care for all of their relatives will be key. We have already talked about flexibility of work time and place. Different Governments have sought to tackle childcare provision and costs but there has been little to address eldercare challenges. Employers can support in areas such as signposting on Wills, Power of Attorney, and how to achieve probate and support for selection of care homes or in-home care
Summary
The over 50s are an increasingly important segment of the workforce with many years of skills and experience. They could be working for many years to come. Their Reward packages need thinking about in the context of their life situations and future plans.
Reward Heads would love to help you. Please contact us at rewardsolutions@rewardheads.co.uk
Victoria Milford - CEO