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Shrinking pension pots force older people to work longer

26 November 2009 / by Andy Davies

Pension funds are shrinking, according to the Chartered Institute for Personnel and Development (CIPD), which it says is forcing an increasing number of older workers to work beyond the state retirement age.

New research by the CIPD shows that the proportion of people aged 55 and above planning to continuing working beyond the state pension age has risen from 40 per cent two years ago to 71 per cent today.

It appears financial factors are the main reason behind employees of all ages deciding to work longer, with 71 per cent of those aged 55 or over claiming this is the case.

The CIPD believes that its findings suggest that the recession has hit pension funds as well as savings and investments.  

Commenting, Charles Cotton, reward adviser at CIPD, believes employers need to review how they are helping their employees save for their retirement.

"With more people planning to work past 65, employers will have to accommodate older workers and motivate those who wish they could be elsewhere," he said.

Further research by the CIPD highlights that currently only 46 per cent of all workers have a pension with their current employer, while more than three quarters of workers aged 18 to 24 do not have a pension with their current employer.

Meanwhile, there appears to be a stark contrast regarding pensions when it comes to public and private sector workers. Public sector workers seem better prepared for their retirement with 90 per cent having a pension plan in place with their current employer, compared to just 36 per cent of private sector employees.

Concerned by these findings, Mr Cotton claims that "so few" private sector workers saving for their retirement is a "ticking time bomb" for the UK economy.

"While auto-enrolment in 2012 is an important step in defusing this, more has to be done to get the message out to individuals that saving for retirement is essential, especially as the state pay-as-you-go pension becomes increasingly unsustainable in its current format," he added.

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