Deborah Moon, HR Consultant, considers some of the key themes in the CIPD Employee Outlook Report for Winter 2016–17 and the potential implications for employers. She also looks at the Department for Work and Pensions (DWP) Fuller Working Lives strategy, the aim of which is to support the over-50s to continue working. Based around the theme of “Retain, Retrain and Recruit”, this outlines how a combination of Government and employer actions can support older workers in either continuing in their careers or in taking a new direction.
Much has been written about the UK’s ageing population and the impact of this, both within the workplace and in society more widely. There is no doubt that this changing demographic presents a number of challenges for employers, but it also provides opportunities for organisations and individuals. Attracting and retaining the best and most productive workforce is likely to be a key aim for most, if not all, employers, and the employment of older workers can help with this. This may become an even greater consideration in employers’ workforce planning arrangements as the impact of Brexit on recruitment and retention, particularly in certain sectors/industries, becomes clearer.
Wider societal and economic benefits can also accrue from the employment of older workers, for example, helping maintain individual financial, health and social wellbeing, contributing to the Government’s ambition of achieving full employment and supporting future pension sustainability. These, and similar, considerations are likely to become an even bigger imperative in the future as the number of people aged over 50 increases.
The CIPD Employee Outlook Report for Winter 2016–17, which focuses on employee attitudes to pay and pensions, provides an insight into a number of aspects related to this issue, including the reasons why employees are working longer and how well prepared (or otherwise) employers are in meeting the needs of older workers. It also highlights a lack of awareness among some employees regarding the shifting state pension age and level of National Insurance contributions (NICs) needed for this.
The CIPD survey is the eighth annual survey of employee attitudes to pay. It is based on a survey of 1658 working adults across all industrial sectors. It was carried out during December 2016. It is considered to be representative of the UK workforce in relation to sector (private, public and voluntary), organisational size and industry type. Its findings are primarily analysed by sector, organisational size, managerial position and pay. Further analysis is provided by region, gender and age.
Workplace pension understanding and awareness
Ensuring adequate saving and financial planning for older age and retirement is clearly an important consideration — the lack of preparedness by many workers and low level of pension provision made by many employers has been a concern for some time now. The pension auto-enrolment arrangements are intended to help address this by encouraging more employees to make at least a minimum level of savings for later life (as well as a statutory minimum employer contribution). There are, of course, well-established pension schemes in the public sector — although these have undergone a number of reforms in recent years, they are generally regarded as continuing to offer a comparatively good standard of benefits.
The CIPD survey found that, between December 2015 and December 2016, there had been a slight increase in the proportion of workers saving though a workplace pension scheme, ie from 66% to 68%. Excluding those workers currently not eligible to be automatically enrolled, the proportion of staff in a pension plan is higher at 71%. Of those who had joined a pension plan, 55% had been automatically enrolled and 37% had made a conscious effort to join, giving some indication of the impact of the auto-enrolment process.
Looking at the survey findings by sector, this shows the public sector has the lowest proportion of employees not in a workplace pension (8%), with 65% in a defined benefit (DB) scheme and 13% in a defined contribution (DC) scheme (the remaining 14% were unsure whether the scheme was DB or DC). This, perhaps, demonstrates the “value” of the public sector arrangements.
By age, those aged 55 and over are least likely to be in a pension scheme (58%), while those aged 45–54 are most likely to be in a scheme. Perhaps not surprisingly, women are less likely to currently be in an employer retirement plan than men (63% of women compared to 72% of men). This may be due to the greater likelihood of women in part-time employment and in low-paid work, where pension provision may not be a prime consideration and/or financially viable for those employees.
Of course, as the report reflects, if someone isn’t saving through a workplace pension, this doesn’t mean that they’re not saving for retirement at all. The survey found that of those employees not in a workplace pension (32%), 6% are saving through a private personal pension.
In terms of awareness among employees about the level of pension contributions, the survey reports that this appears high, with most knowing how much both they and their employers are contributing. However, this does vary between the types of scheme — awareness levels are lower among members of DB arrangements than among those in a DC plan. Among DB members, 70% know what they are contributing and 57% know what their employer is paying. By contrast, 80% of DC members know what they are contributing and 76% know what their employer is paying in. These findings suggest that employers providing a DB scheme (which will include those in the public sector) could be doing more to communicate the full value of their pension contributions to their employees. This could be a particularly important message to convey during times of pay constraints and restrictions/reductions in other types of employment benefits and terms and conditions.
As a proportion of employee salaries, the survey reports that average employer (8.06%) and worker (8.14%) pension contributions are higher in DB than DC plans. In terms of DC schemes by sector, both the average employee and employer contribution is highest in the public sector (9% and 7% respectively). Again, these are important messages and underline the point made above about public sector employers ensuring their employees understand the value of their pension arrangements.
Understanding of state pension arrangements
The survey looks at a number of factors influencing employees’ retirement decisions — these are considered in more detail below. While the state pension is an important aspect of this, there would also appear a “concerning lack of awareness” among employees about the arrangements for this. For example, 39% of workers state they do not know that the state pension age will increase from 65 to 66 between 2018 and 2020. Among those nearer to retirement, the proportion of those aged 55 and over who are aware of the change is 74%, meaning that 26% of this age group appear to be unaware of this increase.
In terms of younger employees, 59% of 35–54-year-olds are aware of the increase to age 66, while 41% are not. In addition, 48% of this age group didn’t know that this was going to increase from 66 to 67 between 2026 and 2028.
Although it may be understandable that those who are further away from retirement have less knowledge about the state pension, it is more of a concern that a proportion of those closer to this also appear not to understand how it operates and what this may mean for them.
More recently, two separate reports for the Government have raised the possibility that people may have to work even longer to qualify for a state pension. Analysis by the DWP suggested that workers under the age of 30 may not get a pension until the age of 70. A second, independent review of the state pension age has proposed that those under the age of 45 may have to work a year longer, to 68. The Government is due to make a decision on both reports by May. Any such further changes would make it even more important that there is clear and regular communication on this issue so that individuals and employers understand and address the resulting implications. It will also be important to understand how an individual’s state pension age relates to the date of access to any occupational pension scheme benefits so that the interrelationship between the two can be properly planned for.
There would also appear to be a “significant minority” of employees (36%) who are unaware that they need to have paid NICs for 10 years to get the minimum state pension and that they must have paid contributions for 35 years to get the full state pension (32%).
As the report states, although it’s “good news” that 76% of those aged 55 and over know that they need ten years of contributions to get the minimum state pension and 86% know that they must have 35 years to get the maximum, there could be a “nasty surprise” for those who do not.
The survey also looks at employees’ understanding of the impact of contracting-in on the size of the state pension, finding that only 39% are aware of this. Among the over-55s, just 54% are aware of the need to have been contracted in for 35 years to get the full state pension. 35% of those aged between 35 and 54 know about the possible consequences of being contracted in or out (the implications of contracting-out is a particular consideration for employees in public sector schemes, such as the local government scheme).
As the survey report indicates, these findings demonstrate the importance of improving employees understanding and awareness about the age at which they will receive the state pension and the contributions required for this, as well as what they can do to receive the maximum, eg paying voluntary contributions. Although the Government clearly has a lead role in making available prompt and accurate information, employers can also play a part in “signposting” employees to the relevant information. This should help employees make more informed choices about when to retire and the financial implications of this. In the absence of this, there may be a significant impact on employers in circumstances where employees find they have to postpone their retirement because they were unaware of what was needed for the full state pension and when they would receive this.
The survey also provides an indication of employees’ changing work and retirement patterns, in terms of when they expect to retire from paid employment. Overall, among those who are able to make a prediction, it reports that more expect to retire after 65 than those who expect to leave at or before that age. While just 31% of 45–54-year-olds expect to continue working past 65, 49% of those aged 55 and over think they will do so. Among those predicting that they’ll carry on working past 65, the average (mean) year at which they think they’ll stop working is 69.6, slightly higher for male (69.9) than female (69.2) employees.
In terms of sector, the public sector has the lowest proportion of those intending to retire after 65 (30%), and the highest intending to retire at, or before, 65 (20% and 29% respectively). This may be linked to the particular pension arrangements and levels of scheme membership and/or the type of work undertaken, particularly those in front-line physically and/or mentally demanding roles.
The survey reports that just over two-fifths (42%) of employees think they’ll retire from their current employer, while the remainder don’t think they will (31%) or don’t know (27%). Perhaps not surprisingly, those aged 55 and over are most likely to predict that they’ll retire from work with their present organisation (71%). However, only 28% of those aged between 35 and 54 think similarly. This may be an indication/result of the changing nature of employment and more “flexible” careers. It will have implications for employers in terms of workforce planning, eg it would appear highly likely that employees in their 50s and over will remain with their existing employer until they retire.
Factors influencing retirement decisions
The report goes on to look at the factors which are important to employees in deciding when to retire. In terms of the state pension age, employees who are more likely to agree that this is important are: 18–24 years old (52%); those who work in the voluntary sector (51%); those who earn less than £10,000 a year (59%); and those employed in transport and communications (54%). Therefore, as the report reflects, any changes to the SPA are going to have a bigger impact on employment practices in these sectors and among these workers.
The report also identifies the other factors which influence employees’ retirement decisions. When asked to rate the factors employees think will be important when deciding to retire, not being able to physically continue working was the most common response, especially for female and voluntary sector staff. In the public sector, reaching the age at which employees can get their employer or private pension is the most important factor. Physical health and access to the state pension were the next most important factors in determining retirement, while mental health appeared not to have such a significant role.
Working beyond 65
The survey also considers the reasons for employees planning to carry on in employment past the age of 65. Of those intending to do so, the most common explanation is they believe that doing so will keep them mentally fit (32%), followed by a desire to earn money so as to enjoy themselves, such as going on nice holidays, eating out, helping out friends and family (27%). Just 8% thought they would need to continue working because of financial necessity, such as bank loans or mortgage commitments. However, 40% of those planning to remain in employment past 65 were unable to give any explanation of why they were planning to do so; this is especially true of those aged 55 and over (51%). The report suggests that this may indicate that for some older workers, work has become a habit, and they’ll carry on in employment even if they are unsure why this is.
When asked how they would like to be employed past the age of 65, the most popular option was in a permanent part-time role (16%), followed by permanent full-time work (9%), and starting off in a permanent full-time job and then gradually shifting to part-time work (8%). “Winding down” into retirement can be a very helpful way to manage this transition, avoiding a sudden, and more dramatic, shift from employment. Employers should therefore be encouraged to consider the ways in which older workers could achieve this, eg by reducing their working hours and/or moving to a less demanding role. Giving people more control over retirement decisions and arrangements can help improve overall wellbeing and life satisfaction. Many employers in the public sector are likely to have these, or similar arrangements, and offer pension schemes, such as that in local government, which incorporate flexible retirement arrangements.
In terms of actions to prolong their working lives by workers aged 45 and over, public sector staff appear the most proactive. Over half of them (54%) are keeping their skills and knowledge up to date (such as through courses or training) and 50% are taking regular exercise. The report suggests this may be a reflection of various initiatives in the public sector focusing on promoting employee wellbeing and training and development, reinforcing the positive benefits of such initiatives.
How well prepared are employers for an older workforce?
Given the increase in the state pension age and an ageing workforce, the survey asked employees how much they feel that their workplace currently meets the needs of those workers aged 65 and over. The responses show the scale of the task facing employers, with only around one in four employees who think that their employer is meeting the various employment needs of this group of workers. The rest of respondents either think their organisation is neither prepared nor unprepared or think that their workplace is unprepared.
In terms of the different aspects of employment, overall, respondents thought their organisations were most prepared to meet the performance needs of those aged 65 and over (28%) and least prepared to adapt their working conditions to meet this group’s requirements(22%). By age, those workers aged 55 and over are most likely to say that their organisation is unprepared to meet the various needs of the 65s and over. As the report indicates, this is particularly concerning as this age group is probably more aware of the working requirements of older workers and so in a better position to assess how well their employer is currently meeting them.
These findings have implications for a range of employment matters, including job design, working arrangements, reward and recognition, and training and development, as well as considerations regarding health and wellbeing (physical, mental and financial). While some may question the role of the employer in these latter issues, there has been an increasing recognition of the importance of this to workplace performance and many employers, including those in the public sector, have adopted more holistic wellbeing strategies which encompass all of these aspects.
Compulsory retirement age
Finally, the survey looks at employees’ awareness of the removal of a compulsory retirement age. Most workers (61%) are now aware that employers are not able to retire someone solely because of their age, unless they can objectively justify their decision. Those that are most aware are workers aged 55 and over (74%) and those aged between 35 and 54 (51%). However, it also indicates that 25% of those who are approaching retirement are still unaware that they cannot be retired by their organisation because of how old they are.
Almost 9 in 10 workers (86%) think that the removal of retirement ages (unless objectively justified) has had a positive impact in their workplace. The remainder were unable to express an opinion. It is, perhaps, encouraging that no one thought that the abolition of retirement ages had been a bad thing.
Fuller Working Lives
The business and employment implications of people living longer (almost a decade longer than our grandparents) are also addressed in this recent publication from the DWP. It reflects on the opportunities for businesses to harness more talent, retain valuable experience and reduce staff turnover through the employment of older workers, utilising new technology to further expand this. It also recognises that the Government has a key role to play and summarises what is being done, including encouraging saving, enabling skills to be developed or refreshed, and enhancing the support on offer through Jobcentre Plus.
It welcomes the fact that people in the UK are living longer and the proportion of older workers in the labour force is increasing. However, in making the case for Fuller Working Lives, it acknowledges that, as the population and the workforce continue to age, employers will increasingly need to draw on and retain the skills of older workers. There will also be a need for retraining to support older workers stay in the labour market, thereby gaining the benefits of a multi-generational workforce.
It identifies a number of benefits of older workers highlighted by employers in DWP polling in 2015:
over three-quarters of employers believed the experience of workers over 50 was the main benefit of having them in their organisation
65% highlighted the reliability of older workers
nearly a third said workers over 50 were easier to manage than younger workers (54% said they were equally easy to manage)
54% valued the role older workers play as mentors
one in five said older workers were more productive
87% rejected the idea that the skills of older workers are unsuitable for their business.
However, it also looks at other DWP research relating to employer experiences of recruiting, retaining and retraining older workers. Although employers valued a mixed-age workforce and were aware in general of an ageing population, very few were taking active steps to change their policies and practices. The key findings were that:
an ageing workforce is not yet a prominent concern for most employers
fear of contravening equal opportunities legislation acts as a brake to employers collecting information on age
line managers may not always have the skills required to ensure older workers feel comfortable discussing issues with them relating to ageing
flexible approaches to work arrangements are much more likely to be made for long-standing employees than for new entrants
employers are less likely to offer flexibility to workers in physically demanding roles (which tend to be lower paid) and this may be contributing to a tendency for lower paid workers to leave the workforce earlier
employers value older workers, but the qualities/benefits older workers are praised for can be hard to demonstrate in a job interview.
As well as setting out the action the Government is taking, the document recognises the “fundamental role” employers play in enabling workers to both stay in and return to work. It reflects that many employers are already working innovatively to embrace the ageing workforce and the challenges and benefits that brings (no doubt, this will include those in the public sector).
The Fuller Working Lives Business Strategy Group was set up to drive change among employers, make recommendations to business on how to harness the benefits of a multi-generational workforce and how the retention, retraining and recruitment of older workers could be improved. It identifies a number of common themes, including the requirement for:
a strong business case for employing older workers within each organisation and sector to show the economic need and impact
improving line management training and awareness to understand and address the challenges being faced
an online portal providing information for both employers and individuals in relation to all issues affecting older workers; including health conditions, decisions about retirement and finances, skills and training.
It sets out a number of examples of the type of issues that were examined under the headings of Retain, Retrain and Recruit, providing a “flavour” of the areas of focus and the recommendations made for other employers. These three themes are summarised below.
The Business Strategy Group identified three areas to focus on.
Developing the business case for older workers.
Improving manager education.
Providing support for older workers with caring responsibilities.
They recommended that businesses:
encourage flexible/agile/dynamic working for carers, together with practical support, in order to help them to balance their work and caring responsibilities, and align to a focus on productivity rather than actual working hours
review employee benefits to ensure that they are flexible enough to work for people at different stages in their lives
engage older workers through listening forums and diversity network groups
analyse employee skills and provide reskilling advice
actively transfer knowledge between generations and encourage mentoring (reverse mentoring)
encourage employees to think about multiple part-time roles and changes to their careers
provide good retirement transition preparation for employees
support financial planning and education
enhance the profile of volunteering, utilising industry skills for the benefit of the voluntary sector
develop partnership models with local colleges — working closely in partnership where there are options for highly skilled members of the workforce looking to reskill or reshape the end of their careers to move into further education.
A number of key issues are explored in more detail, with case study examples. These cover:
managing health conditions in an ageing workforce
the need for employers to develop an understanding of the age of their workforce so they can identify and accommodate older workers’ needs (the document includes a Roadmap to Retention to help employers with this)
the importance of supporting carers
developing financial to help employees make prudent decisions at different life stages, and facilitate consideration of their short, medium and long-term financial security.
The document reflects that older workers can often be overlooked when it comes to new training opportunities. However, it points out, that someone in their early 50s could potentially stay with their employer for a further 15–20 years. It suggests that there is a “clear case for investing in their future and, in so doing, that of the business”. It gives examples of employers who are already recognising the importance of retraining, such as apprenticeship schemes for older people. It refers to the introduction the Apprenticeship Levy in April 2017, which will place apprenticeship funding in the hands of employers, and suggests this will “enable employers to be more demanding customers, shaping the training on offer to meet both their skills needs and those of the ageing workforce”. The Government has set a target for the number of apprenticeships within the public sector (which has been the subject of some concern/criticism) — could apprenticeships for older workers assist in meeting that?
It gives a number of examples of the types of actions employers are taking, including:
using a range of learning styles and methods to upskill and retrain both older and younger workers in specialist trade craft skills
running inter-generational schemes to allow employees of different ages to share their knowledge and experience
returner initiatives to help those who have taken career breaks for caring reasons and want to get back to work. Although such breaks have typically been taken by women for childcare reasons, this also includes those with wider caring responsibilities. This is an issue which is growing in importance, as older workers increasingly find themselves caring for parents or their partner
“Alumni” networks to keep in touch with staff who have retired and who have skills and experience which can be useful to the business in the future.
Other measures also include:
ensuring older workers are offered/included in training and development courses
training/retraining questions in staff satisfaction and engagement surveys
retraining aspirations and needs in workplace career reviews
introducing volunteering activities
auditing training programmes to check training spend is evenly distributed across age groups.
The document reflects that one of the most significant barriers to the recruitment of older workers is age discrimination, whether conscious or unconscious. In addition, recruiters may be more likely to employ someone closer to their own age, which can mean that the skills and experience of older workers is overlooked. A number of areas of “best practice” for businesses and organisations at both a strategic and practical level are identified. These include monitoring the workforce by age at all stages of the recruitment process to ensure that the process is fair and not influenced by age discrimination (something which a number of public sector organisations are likely to do).
Recommendations for employers include the following.
Recruitment policies — consider the implementation of “age blind” recruitment policies, focusing on a competency based or a strength-based approach.
Recruitment agencies — ensure that recruitment intermediaries such as employment agencies are fully aware of an organisation’s requirement not to discriminate on the grounds of age, and that they are held to account in order to demonstrate compliance; consider, where appropriate, the use of agencies specialising in older workers.
Line manager training — ensure line managers receive adequate training to improve awareness of issues affecting older workers’ employment, so that they can provide effective support.
Unconscious bias — consider training in unconscious bias, which incorporates an age bias element, for those involved in recruitment and selection.
Recognition of older workers experience. The use of qualifications in the recruitment process can mean that older applicants, while they may have a lifetime of experience, could face a challenge in being shortlisted, regardless of their potential.
Succession planning — ensure that this is conducted without an automatic assumption that the incumbent of a post will be succeeded by a younger person.
Positive action — consider offering support to older job applicants in order to improve their prospects of successful job search and selection, eg career counselling, CV writing, digital skills support for online applications, etc.
Action by individuals and by Government
As well as the actions for employers, summarised above, the document also sets out a number of recommended actions for individuals around the themes of Rethink (such as finances, health and different ways of working), Refresh (improving skills or retraining for a new career), and Reinvent (such as staring something new or volunteering).
Actions the Government is taking include: legislation to support Fuller Working Lives, eg extension of the right to request flexible working: analysis and research to develop an evidence-based case for action; support for those who need more help, eg women (such as returnships), people with health conditions and black and minority ethnic groups; reforming the adult skills systems; and improving the Job Centre Plus offer for older workers.
Developing an older workforce
Both the CIPD report and DWP strategy document highlight the need for employers to fully embrace the concept of an older workforce and the importance of removing barriers to this, such as ensuring there is no discrimination in recruitment, avoiding age stereotyping, providing access to training, enabling flexible working, as well as other additional support through wellbeing programmes which take account of the physical, mental and financial needs of older workers.
As the reports recognise, there is also a need for employers to provide and plan for the needs of a multi-generational workforce, and for working with increasingly “age-diverse” teams. Utilising older workers experience and knowledge in this type of working environment offers potential benefits to both the employer and to other workers, eg where older workers act as mentors to younger colleagues. Younger workers may also find themselves managing older employees and this may require guidance, eg as part of leadership development programmes, to help deal with younger boss-older subordinate scenarios.
It would also appear that there is a need for employers to enhance and improve communications regarding pension benefits, both in relation to occupational schemes and to the state pension so that employees have a better understanding of their entitlements and when they will receive them.
An older workforce can provide many benefits and opportunities — employers need to ensure their people practices are designed in a way which seeks to maximise those, ensuring that talented older workers can continue to work without facing organisational and attitudinal barriers which may prevent this.
Employee Outlook Winter 2016–17: Focus on Employee Attitudes to Pay and Pensions available on the CIPD website.
Fuller Working Lives: a Partnership Approach available at www.gov.uk.
Deborah Moon is a Consultant in HR and is a regular contributor to Croner-i HR for Local Government. Croner-i HR for Local Government is an online employment law and practice reference source designed specifically for HR Managers and their teams in local government.
Last reviewed 4 May 2017