Aegle Limited

An interesting article by Lucy Kellaway http://www.bbc.co.uk/news/magazine-17855240 this morning points out that if those over 50 who have had it so good were to resign it would have a positive effect on job prospects in the problem youth employment sector.
This is a pertinent point, particularly as the Government have abolished the statutory retirement age meaning that people can choose when they retire.
The real trouble seems to be that there is now far less opportunity available for career progression within organisations than there used to be. Companies are no longer paternalistic and as a consequence have largely lost the loyalty of staff.
An influx of cheap and willing labour over the last decade has produced considerable competition for what jobs there are, particularly those at the lower salary levels.
These young workers are largely waiting for “dead mans shoes” opportunities so there is a good argument for encouraging older workers to retire, after all many have benefitted from property inflation, non-contributory pensions and healthy investment returns.
Perhaps the Government should be considering ways to alleviate the bottleneck along with pension reforms that may enable more over 50’s to make way for younger workers.

According to the Pensions Policy Institute nearly half of those over 50 will be forced to work until at least the age of 77 in order to enjoy a comfortable retirement (that is defined as between 50 & 80% of gross salary when working).
Millions will find themselves unable to afford to retire according to the report and will be faced with saving more or working longer to meet the shortfall. The truth is that neither of these options is very likely given the difficulties that older people have in finding work, the paltry investment returns on offer and the limited time available for growth.
Those who have saved have been victims of poor returns over the last decade and are likely to find annuity rates particularly poor. Others who have borrowed to fund their lifestyle will be forced to downsize to repay their debts.
The outlook for all is a much poorer retirement that their parents or grandparents and this in turn will impact the economy as a whole, many retailers rely upon “grey pound” spending and will suffer as a consequence.
With the collapse in final salary pension schemes, poor pension fund growth expectations and an all-time low in pension saving the Government really needs to look at how best to encourage saving but more importantly alternatives to annuities that can be used to provide an income in retirement. It is too late for those already over 50 to save any more so something must be done to maximise the returns on what savings they have.

The current financial crisis rumbles on with winners and losers dependent upon their time of life and indebtedness.

Savers are the big losers with interest rates at historically low levels they are seeing minimal returns on their hard-earned savings. On the other hand up to now those with a mortgage have been benefiting from those same low mortgage rates through lower and more manageable repayments.

Those retiring are experiencing the lowest recorded annuity rates through a combination of longer life expectancy and low gilt yields. On the other hand those pensioners who retired more than 10 years ago are still benefiting from the high annuity rates available then or from final salary pensions which those working toward retirement now may envy.

It seems to me that in general those in work and below the age of 50 are probably net beneficiaries as they are most likely to be carrying some sort of debt. 60% of over 50’s are, according to SAGA, more worried about their living costs than a year ago and are reducing their spending on non-essential items. A third are also in some way financially supporting children and grandchildren.

The higher cost of energy is impacting on poorer families and pensioners who are increasingly choosing between heating and eating. Conversely the inflation this has created has meant that those on state pension or benefits will have a significantly higher increase in their income from April than any public or private sector employees.

The impact of the changing attitude to debt will have longer-term consequences for the economy as a whole. There will be increased emphasis on paying down borrowings, a trend already being seen, and consequently a drop in demand for many goods and services.

The result is that those continuing to spend are likely to be people reliant on state benefits and well-off pensioners who are relatively unaffected. In the longer term as these pensioners die off they will be replaced by much poorer pensioners less able to keep the economy going. Businesses are going to have to reconsider their target markets to counter these negative effects.

It is disturbing that nearly half the unemployed people over 50 have been out of work for over a year according to yesterday’s labour statistics. Why is this so?

Firstly older workers are often more affected when redundancies are made. This is because they often earn more than their more junior colleagues having perhaps been with the company for longer or by just being further up the career ladder. Taking the maths into account an employer can save more by making one expensive person redundant than a number of lesser paid staff. In general this is more acceptable as it means fewer people over all losing their job. In my experience new, younger management often see older more experienced staff as a threat and this obviously means they will target those when redundancies are necessary.

Once unemployed over-50’s often find it hard to get back into work. This could be because they have been used to earning a good salary and are therefore too expensive for the potential new employer, it might be because their skills are no longer in demand or perhaps that they are seen as rather too set in their ways. Or is it that employers feel that they are in a buyers market with vast numbers of potential employees to pick from and so pitch the salary at the lowest possible level which is no better than unemployment (and other) benefits pay?

The jobs being created are either part-time and/or being filled by foreign workers, employers are clearly showing no optimism in the market conditions or taking cheap but reliable labour in preference to home grown talent.

Age UK are calling for direct help to enable older workers to get back into employment claiming that employers are missing out on skills and experience.

Maybe there are other alternatives open to the Government though. Those workers over 50 have benefited from over 3 decades of unparalleled improvements in their standard of living, booms in house prices and investments into final salary pensions (albeit they might now be closed). If the Government were to devise alternatives to the current pension system which were not exclusively annuity based (and hence linked to gilts) it would be possible for large numbers of these older workers to effectively retire making room for other unemployed people to take their place and reducing the unemployed significantly.

Much of the economy relies on the well-off pensioner, look at garden centres, pubs and restaurants who all offer deals to attract retired people. In the long run as pensions are much reduced in value these companies are going to find a much reduced clientele and the Government a reduced tax-take. Radical reform of pensions and the way they are taxed is essential to ensure that in the long term the economy is not adversely affected.

Surprised researchers have revealed that in tests it is the older age group rather than thrusting youngsters who are the fiercest competitors.

It had been thought that 50 marked a change to a more mellow outlook on life but it appears that a merciless streak develops as we age. Maybe it is a desire to show we are not over the hill, a need to show social dominance or perhaps a manifestation of the intolerance and frustration that seems to develop.

Whatever it is men are far more affected than women, even engaging in competition without any regard to their actual probability of winning. Maybe this explains why many poor business decisions seem to stem from macho megalomaniac bosses.