It’s a nice problem to have. With improved lifestyles and healthcare, we are all living longer. The flip side, however, is that we will probably all have to work a lot longer and it also is clear that all of us currently in the workforce should be seriously considering how to fund our longer lifespan.
The retirement age in the UK is on course to reach 67 by 2028 and 68 between 2044 and 2046 (although the government announced plans in 2017 to accelerate the move to 68 between 2037 and 2039). By contrast the Centre for Social Justice (CSJ), a centre-right think tank chaired by former UK Secretary of State for Work and Pensions Iain Duncan Smith MP, last year advocated increasing the age for receiving state pension to 70 by 2028 and 75 by 2035.
And if we look at the average female life expectancy by generation, we can see that this challenge is already firmly embedded within the workforce.
- Baby Boomers (1946-1965) – 83 years
- Generation X (1966-1980) – 87 years
- Millennials (1981-2000) – 90 to 96 years
- Latest Generation (2001-2015) – 96 to 101 years
- Next Generation (2016-2035) – 95 to 107 years
Source: UK Office for National Statistics (ONS), 2014 UK & England & Wales life tables.
Those of us that are Baby Boomers and Generation X’ers have grown up with the traditional framework of three core phases of life: education, work and then retirement. Our expectation is that we will retire in our sixties and potentially have a good 20 years to enjoy the fruits of our labour. Some lucky souls may have the benefit of enjoying the last of the defined benefit pensions before they were phased out by the private sector and receiving pension income before it becomes means tested.
It is the Millennials that will be at the forefront of this seismic shift. The traditional three core phases of life will expand to a multi-stage life that could easily include double the current life phases, with additional education and/or community-minded phases.
We should also add into the mix the impact of artificial intelligence (AI), which will significantly change the make-up of the workforce over the next few years, as well as the reality of remote working that will continue to be facilitated by technology. This means that the relationship between employers and employees is also set to change massively.
With life expectancy increasing, we will be working for longer and we will begin to see a workforce that contains five generations working alongside each other. Employers will face the challenge of accommodating each generation, which may all have different expectations as to how they want to be engaged and empowered. They will also have to make sure that the older generations adopt technological advances and remain productive and engaged.
Taking all of this into consideration, planning for our future is now more important than ever. Governments worldwide are all staring into a pensions abyss, and they are seeking to shift the responsibility and burden onto the shoulders of employers and individuals.
Tailored retirement solutions, that can support employers to fulfil their duty of care and to engage with employees in a way that suits them will become a key component in any employee benefits package.
If you would like to discuss discuss these challenges further or find out more about how the Sovereign Group can assist, then please contact us:
Jo Smeed, Sales Executive
Telephone: 01481 729 965
Darren Whitley | Managing Director, Sovereign Pension Services (Gibraltar) Limited
Telephone: +350 200 41145 Ext: 2325