People aged over-50 are facing a lifetime of financial insecurity as a report reveals which age group is being hit the hardest by the cost-of-living crisis.
Research from Edinburgh University’s Smart Data Foundry found economic inactivity rates have risen by a third amongst the over-50s age group since 2019.
And people aged 50 to 54 could experience double the financial vulnerability risk than those aged 70 to 74, according to the leading UK data scientists.
It is leaving those in their 50s and 60s facing the “perfect storm” of redundancy and ill-health, combined with a lack of savings on pension provisions, the report notes.
Older workers are at very real risk of financial vulnerability, but it not yet too late to act— Dame Julie Unwin, Smart Data Foundry
People are being forced to make tough financial decisions to make ends meet such as withdrawing lump sums from their pension pots to deal with the pre-retirement income shocks.
With most pension pots being worth under £30,000, these measures are estimated to cause knock-on effects with income tax and benefit entitlement.
The UK Government is now being urged to intervene to prevent the damage being irreversible for over-50s.
Dame Julie Unwin, chair of the data group, urged the Department of Work and Pensions (DWP) to act to reduce the risk of pension assets being spent before retirement.
The report suggests an increase to the current capital limit of £16,000 for means-tested benefits.
She said: “We are seeing a pattern of people in their early to mid-fifties going from being in positions of comfortable, middle-aged breadwinners eyeing their future retirement over the horizon, to a generation suddenly finding themselves facing long-term financial hardship.
“A combination of being unable to secure viable work, confused messaging over pensions, little by way of state aid, and the savage cost-of-living rises resulting in making decisions that could have long-term negative consequences.
Any disruption in earning capability in the decade before the state pension is forcing older workers to draw down on savings earmarked for retirement with little ability to top up the pot, leading to the risk of financial vulnerability becoming lifelong— Dr Lynne Robertson-Rose, Edinburgh University
“With this report, our key recommendations, we are calling for the UK Government to intervene to protect and support the most vulnerable before it is too late.
“If they don’t act now we will undoubtedly see even bigger problems in the years ahead.
“Data doesn’t lie; the evidence is there – older workers are at very real risk of financial vulnerability, but it not yet too late to act.”
The report also uncovered that older workers are encountering barriers to returning to work, including the lack of digital skills, ageism and lack of Government initiatives.
Dr Lynne Robertson-Rose, of the University of Edinburgh, the lead researcher, said: “We set out to understand the financial vulnerability amongst those in their 50s and 60s and have been surprised by the bleak picture that the data paints.
“Any disruption in earning capability in the decade before the state pension is forcing older workers to draw down on savings earmarked for retirement with little ability to top up the pot, leading to the risk of financial vulnerability becoming lifelong.”
The research was supported and funded by abrdn Financial Fairness Trust.
A DWP spokesperson said: “We know that older workers, including those approaching State Pension age, are a huge asset to our economy while for those who can’t work, we provide a strong welfare safety net, which includes Universal Credit.
“We also understand that people are struggling with rising prices which is why we have acted to protect millions of the most vulnerable through at least £1,200 of direct payments this year, and there is a wealth of additional financial support available when people reach State Pension age, including Pension Credit – which unlocks an additional £650 cost of living payment for those currently claiming it – and Winter Fuel Payments.”
