July 2005 – Dealing with enforced retirement

A UK law against age discrimination came one step nearer last week when the Government published draft regulations due to be enacted in October 2006.

The regulations, that continue to allow employers to retire people who reach the age of 65, introduce a formal process that employers will need to follow when retiring an employee.

At the same time employers will need to consider seriously any request by employees to work flexibly after they have reached the age of 65.

Some campaigning groups are disappointed that a formal retirement age has been retained. Moreover, a stipulation that employers will have to provide the same insured benefits to any employee at any age may act as a disincentive to employers if it means that they face larger insurance premiums for older employees.

The Employers Forum on Age has raised this issue as an area of concern. A far greater concern, however, must be that employment opportunities improve for those in their fifties, many of whom in recent years have been picked off in redundancy programmes and by pressure for early retirement.

Overall the regulations, that insist that employees should not be regarded as too young or too old to apply for a job, training or considered for promotion, should concentrate the minds of employers on an area of unfair discrimination that has been ignored or neglected in the past.

It may remain difficult to prove age discrimination, however, in cases where subtle pressure is applied by employers. Moving an unfavoured individual sideways or removing responsibilities, common practices that equate to demotion, are unlikely to disappear.

For many senior white-collar managers who have reached the top job in their function, the issue they often face is that there is nowhere else to go. So the option of generous retirement terms or voluntary redundancy package can prove irresistible.

The difficulty then arises when they seek another job and find that full time job opportunities are almost non-existent. The lucky ones may find some consultancy work, a non-executive directorship or possibly interim work.

But those less fortunate will find themselves condemned to long years of retirement when they still have much to give in skills and experience. Too much older talent has been lost in the past 10 to 20 years as companies become attracted increasingly to younger managers or to leaner management arrangements that have left too few jobs at the top.

It is difficult to quantify the economic impact to the country created by the early retirement of a substantial proportion of the over 50s. A report by the Office for National Statistics* has highlighted a significant under-representation of the over fifties in the labour market.

The report found that the number of economically inactive people aged over 50 in the UK had risen during the previous 10 years by about 413,000 to 12m in 2004. But because of a proportionately larger increase in the total population of people over 50 in that period, the percentage of inactive people in this age group had fallen slightly to just under 62 per cent.

The report found that people with degrees were more likely to retain work in their fifties than those without qualifications. But it also found that people in professional and managerial jobs were more likely than those in lower-skilled groups to have taken early retirement.

The problem with opting for early retirement is that many of those who do so believe quite justifiably that they still have much to give. The answer for these people, says the report could be to find flexible kinds of employment or “bridge jobs” that can fill the gap between premature and permanent retirement.

The report revealed a higher percentage of employment over the age of 65 among smaller employers and people working on their own account. This suggests that self-employment could help to provide the transition from a full-time permanent job to work that will prove useful, flexible and rewarding in to old age.

What the report cannot reveal is levels of under-employment among the over 50s or, indeed, what might be considered under employment. There may be many former senior executives who would welcome a break from long hours at the office and the demands of travelling. But few would like that break to be so sharply defined that they are left with nothing to do.

A few days ago I had a letter from a daughter worried about the impact on her father of losing a senior job where he had been working overseas. At the age of 52, she said, he was having little success applying for other jobs yet still had a large mortgage to support.

My advice, based on speaking with others in similar positions, was to stop applying for jobs and to move in to self-employment. For many former executives this option is often interpreted as interim management but this kind of work is not suitable for all, nor is it as widespread as some in the interim management industry would like to suggest.

I also advised that, since most of his children had left home or were of working age, he might consider moving from his five-bedroomed house to somewhere smaller in order to get rid of the mortgage and create some kind of financial buffer. The daughter agreed but said her mother would fight such a move since it would send out signals about a loss of status.

This suggests that even now, after years of white collar clear-outs, some people are still failing to understand the realities facing many who reach their fifties in managerial jobs. A sensible approach, even where a job may seem secure, is to draw up an escape plan that includes provisions for future underemployment.

If people give themselves this option they are less likely to be backed in to a corner where they must either leave or face a future in unfulfilling full-time work, counting the days to retirement.

Some may find a more secure future in the voluntary sector where ageism is far less prevalent. Others may choose self-employment although this will involve the acquisition of new skills such as marketing, negotiation, selling and pricing.

In 2004 some 20m people in the UK – a third of the population - were aged 50 and over. By 2024, according to the ONS paper, it is estimated that the over-50 population will have increased by about 6m, representing 40 per cent of the total population. At the same time the number of working-age people below 50 will have dropped and, if the trend among young people to stay longer in full-time education continues, the economic reliance on the over 50s is going to grow.

By that time I fully expect that our concept of retirement will have changed beyond recognition. In fact the only remaining prospect for retirement may be the word itself.

*The labour market participation of older people, by Elizabeth Whiting, Office For National Statistics, Labour Markets Trends, July 2005.