Longer life spells more work

The dream of quitting work while still young enough to enjoy decades of uninterrupted pleasure is over.

A British study suggests falling pension payouts and longer life expectancy mean that most of the population will not be able to retire in their fifties.

Instead, they will have to save harder and work up to the official retirement age to have a comfortable standard of living once they stop work.

It is a trend likely to be reflected here, with New Zealanders recording the largest improvement in life expectancy in the developed world over the past 10 years.

Yesterday, the Herald reported that New Zealanders' life expectancy has increased by three years.

Men who reach the age of 60 can expect to live to 80, while women at 60 can expect to reach 84.

The British report from the Institute for Fiscal Studies said that the growth in the number of workers retiring early in the 1980s and early 1990s was coming to an end.

Although the number of men aged more than 60 and still working fell to 30 per cent last year, from a high of 70 per cent in the mid-sixties, that trend is about to stop, said institute spokesman Professor Richard Blundell.

The trend would be curtailed by the falling value of occupational and state pensions schemes, restrictions on eligibility for invalidity or disability benefits and companies changing pensions from those promising a proportion of final salary on retirement to ones that give no guarantee about the levels of payment.

"As a nation gets wealthier, it will want to spend more time in leisure activities, and retirement is a reflection of this," he said.

"But individuals will also want to have access to sufficient resources to maintain their standard of living in retirement.

"With earlier retirement and longer expected lives, this means a need to save more, often considerably more, for retirement."



The trend has hit people such as Mike Rogan, a former engineer who planned to retire at 58, but found his pension payments were worth far less than he expected.

Mr Rogan, from Consett in County Durham, had budgeted on receiving £130 ($441) a week from his personal pension to combine with savings and other benefits.

But when he checked the figures after he fell ill at the age of 43, he found he would receive only about £75 a week because of lower stock market yields.

Unable to return to his original job, he runs a company broadcasting religious services over the internet, and remains bitter about his pension experience.

"It is like going to a bank to take out money that you invested and being told it is not there.

"If I had put the money into a high-interest bank account I would have done better."

Steve Webb, the Liberal Democrat pensions spokesman, agreed with yesterday's report.

He said early retirement was being made increasingly difficult by companies moving to defined contribution pension schemes, which offer no guarantee of what a fund will be worth and leave individuals to shoulder the risk of adverse stock market movements.

"There are still an awful lot of people who imagine that they will retire at 52 and play golf for the rest of their life and nobody is letting on how far away that dream is.

"It has always been hard to retire in your fifties but now that the state pension is so poor and company pension rights are being eroded it has become even harder."

Mr Webb said the Government should look at ending compulsory retirement at a set age and move to a more flexible system in which people could work longer.

Early retirement was possible for many people in the eighties and nineties because executives were made redundant during the recessions and were able to take advantage early of final-salary pensions - which guarantee a percentage of an employee's final wage packet.

Most large companies, including British Telecom, have now stopped offering final-salary schemes to new employees because they have become too expensive.

The accountancy group Ernst & Young has closed its final-salary scheme to new contributions and current members of the scheme will no longer be able to pay money into it.

They will instead have to join the group's defined contribution scheme.

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