Commentary on the Economist Intelligence Unit’s new ‘Is 75 the new 65? Rising to the challenge of an ageing workforce’ report, sponsored by Towers Watson
Over three-quarters of UK employers expect the number of employees aged 60 or over to increase between now and 2020, including 29 per cent who expect it to increase significantly.
John Ball, UK head of pensions at Towers Watson said: “Thankfully, few UK employers report negative attitudes towards older workers. Only 13 per cent say that older workers are less productive than younger workers, 16 per cent that they are less motivated, and 24 per cent that they take more time off sick.”
However, employers are not completely relaxed about the prospect of an ageing workforce. Asked about the most likely consequences for them, 47 per cent pointed to higher benefit costs.
John Ball said: “An ageing workforce creates significant challenges for employers, especially around how to control the cost of benefit provision for this group of workers. Employers need to recognise that the benefits they offer need to be adapted to deliver to the needs of the whole workforce, regardless of age.
“Where defined benefit pensions still exist, pension provision also costs a lot more: the less time there is to invest contributions before the promised benefits must be paid out, the higher these contributions must be.
“The contributions on offer in defined contribution plans are usually the same regardless of the employee’s age but this does not mean that pension costs will stay flat as the workforce ages. In most DC plans, how much the employer pays in depends on what the employee is prepared to contribute. In our experience, older workers are more likely to take full advantage of the matching contributions on offer.”
Overall, the number of people aged 60 or over in the UK is projected to increase by 13 per cent between 2013 and 2020. However, with the post-war baby boomers already in their mid-60s, most of this growth should be at older ages where people are much less likely to be in work.
John Ball said: “Population change alone will only deliver a modest increase in the number of older workers by 2020, but people are likely to retire later too. A combination of higher life expectancy and inadequate savings inevitably means working for longer, and higher State Pension Ages will give this a nudge. Everyone not already in their 60s has a State Pension Age above 65.”