Employees unaware of retirement age changes

Employees over 50 who are planning to retire in the next few years will be in for a shock because most workers are not aware of the changes in retirement ages set to be implemented, according to new research released today from Aon Consulting.

Only 24 per cent of the 4046 respondents to Aon’s national survey, said they were aware that the minimum retirement age is set to rise from 50 to 55 in April 2010. The figures are little better amongst those likely to be affected by the issue – less than a third, 31 per cent of workers aged 45 to 54 said they were aware of the increase to the minimum retirement age. Aon says a significant amount of workers could effectively be forced to work up to five years longer than they had planned.

Aon says as people are expected to live longer than previous generations, so by raising these key dates, the amount of time they can contribute to private and State pensions is increased, while the time available for them to draw on the pensions is reduced.

While this means that employees unaware of retirement age changes could have to continue working for longer than they anticipated, Aon says this extension provides the opportunity for people to increase their annuity by paying into their pension for longer.

But Aon says that while the changes are potentially beneficial for employees’ finances, the opposite could be true for employers, as benefits become increasingly expensive. This will be due not only to the increased health demands of older workers but also due to continued employer pension contributions.

Helen Dowsey, principal at Aon Consulting says: “These findings have clear implications for Britain’s workforce and their employers. It is disappointing, but not entirely surprising, that so few people are aware of changes to the minimum retirement age and the State pension age.

“Employees should double check when they are able to retire, no matter their age. This applies to both the State pension, but also to many private pensions that have ‘Normal Retirement Ages’ at which members can start to draw upon their savings. We have seen massive legislative changes to pensions and unprecedented volatility in pension investment: the workforce needs to forward-plan for retirement to understand and respond to these changes and market conditions.”