Many early retirees will end up dependent on the State as their financial resources dwindle due to i...
Many early retirees will end up dependent on the State as their financial resources dwindle due to increased longevity, FSA chairman Howard Davies told NAPF delegates at a recent conference.
Davies said the UK was witnessing a bizarre combination of trends, with mortality lengthening while workers are retiring increasingly early.
He added that the message that early retirement made little economic sense in the context of an ageing population had not reached down into many organisations.
He said: "The implications for this worsening ratio are dramatic because the amounts needed to be saved while in work rises by a huge amount. Many people who take early retirement will end up reliant on the State as the real value of their pension falls."
Davies added that the ratio between the number of years in employment and the number spent in retirement is distorting from 45:10 to 30:30.
Employers cutting back on their over-50s workforces had contributed to the rising trend in expectation of early retirement, according to Davies, who added that UK companies have been reluctant to acknowledge the problem.
"They thought that having a funded, or over-funded pension would see them through," he said.
"Funded schemes are not the full answer. They still depend on the productivity of future generations. If activity rates fall, the return on assets may fall too."
Davies said another employer delusion was that there was a chronic unemployment situation and it was only fair to share the work around by retiring off the over-50s who had had their chance.
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