Yesterday I downloaded and read through the DWP’s “Fuller Working Lives – A Framework for Action”, a document which aims to set out the case for retaining older workers in employment for longer.

And whilst I fully support and endorse the aims of the document (and indeed will be using some of the findings in both blog posts and forthcoming events), I couldn’t help noticing that there may be a lack of joined-up-thinking in the Government approach to older workers.

The Ministerial Foreword of the document states;

“Unplanned exit from the labour market can have catastrophic consequences for individuals’ living standards into old age, and comes at great cost to the economy, business and society as a whole. So we want to take action to prevent this…”

The document goes on to list the various streams of work that may help manage this issue. All well and good, and signs of some progress in this area.

Yet there was little mention of one major legislative change which could easily encourage many additional hasty, and possibly ill-advised (at least from a financial perspective), exits from the workplace at an early age. The changes I am referring to are (of course) the much discussed Freedom of Pensions proposals. For those new to this subject you might want to refer to my earlier posts - this is a good one for starters http://goo.gl/EJE8ba.

The bottom line is that Mr Osborne’s proposals, although welcome, may suggest to older workers that an early exit from the workplace is both possible and financially sensible – when in fact the pension funds available might be woefully inadequate to provide an income for the many years of retirement yet to come. This could lead to a wave of early retirees, who only appreciate their mistake some years later (by which time returning to the workplace will be significantly more difficult).

And this issue has implications for employers also.

The UK’s workforce demographics are going through a period of significant change, and it seems likely that employers will have to retain their older workers for longer to avoid a skills shortage. This could be increasingly difficult to achieve if more early exits occur as a direct result of the new pension access proposals.

It’s difficult to see any better solution to the above than employers providing access to financial education in the workplace for their employees. Such education has often been the preserve of the larger employers in the UK, but I genuinely expect medium sized employers to start taking more serious steps towards including this service within their core benefits package in the coming years.

In the meantime, we await further details on the final proposals for Freedom of Pensions, and I will of course keep you updated as they become known.

Best regards

Steve