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Older workers just can't afford to retire
The number of older people starting their own business has rocketed as the cost of retirement increases.
by Michelle McGagh on Feb 13, 2013 at 14:17
Retirement is becoming increasingly expensive as inflation continues to eat away at the value of savings, leading to a boom in the number of over-50s becoming their own boss.
The latest figures from the Office of National Statistics (ONS) show the number of people who are self-employed (as their main job) rose 367,000 between 2008 and 2012. Although the economic downturn has prompted more people to work for themselves, a staggering 84% of the rise is due to those over aged over 50 working for themselves.
According to the ONS the four most common occupations for self-employment at any age are taxi driver, construction trades, carpenters and joiners, and farmers.
This increase in self-employment can in part be put down to people losing their jobs in the economic downturn. But according to Malcolm McLean of pension consultancy Barnett Waddingham the boom is due to people not being able to afford to retire.
‘The considerable increase in over 50s who are becoming self-employed highlights the rise in the number of people who simply cannot afford to retire,’ he said.
Increasing cost of retirement
Retirement is expensive and for most people the state pension, although it is being increased to £144-a-week for everyone in 2017, will still not be enough to live on.
With inflation still at 2.7%, despite the Bank of England’s target being 2%, UK households collectively need to find an extra £17.7 billion a year to maintain the standard of living enjoyed 12 months ago, according to figures by MGM Advantage.
This means each household has to find another £678 a year to afford the same living standard they had last year. Data from the ONS shows that worker income has fallen 3% in real terms since 2009 as inflation has eaten away at small wage increases. Wage value peaked in 2009 but over the past three years inflation has left earnings at their lowest in real terms since 2003.
For those working it is hard enough to find the extra money but those in retirement have no way to increase their income.
Aston Goodey, distribution and marketing director at annuity provider MGM Advantage, said: ‘The hidden cost of inflation can have a devastating impact on retirees’ incomes, which are typically fixed…Over a typical 20 year retirement, people could easily see the real value of their income halve after inflation.’
Too late to save?
As a nation were simply not saving enough for retirement.
Research from Friends Life shows just 25% of over-50s felt that they had contributed enough to their pensions in their 20s, 30s, and 40s to be able to afford a comfortable retirement.
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