A new report has warned that Britain is “alarmingly unprepared” for the economic impact of retirees making up over a quarter of the population by 2074.
Rachel Reeves has been urged to incentivise over-60s to get back into work (Image: Getty)
Rachel Reeves has been urged to tackle the challenges of a rapidly ageing population by introducing tax incentives for people over 60 to re-enter employment. A new report compiled by the House of Lords Economic Affairs Committee said Britain is “alarmingly unprepared” for the impact of demographic projections on its long-term fiscal outlook. Ministers were called to lay out a clear strategy encouraging people in their mid-fifties to mid-sixties to return to the workforce in the document, titled Preparing for an Ageing Society, published last week.
“The greatest improvement in fiscal outlook will come from encouraging and incentivising those in their mid-50s to mid-60s to remain in or return to work,” it read. Committee members also advised the Chancellor to remove “cliff edges” in public service pension schemes, where specific thresholds cause a large loss of benefits or an increase in tax liability, in a bid to stop people from retiring early.
The report warned that Britain is unprepared for the challenges of a rapidly ageing population (Image: Getty)
The report warned that by 2074, people aged 65 and over are expected to make up over a quarter of the population – a shift that would fundamentally alter the country’s old-age dependency ratio.
The number of people at or above state pension age could also match the size of the working-age population within five decades.
The committee cautioned against any further increase to the state pension age, which is due to rise from 66 to 68 by 2046, suggesting it could worsen financial hardship for those approaching retirement while providing only limited workforce gains.
Members also pointed to the crisis in UK social care as a “scandal” that needs to be urgently addressed, with an ageing population requiring more careworkers, potentially reducing the employee pool for other parts of the economy.
The House of Lords committee previously warned that 565,000 fewer people are currently economically active compared with pre-pandemic levels, with the number of over-50s claiming benefits reaching nearly two million in August, according to data from the Centre for Social Justice.
Committee chair Lord Wood of Anfield told BBC Radio 4’s Today programme: “Ageing is something we’re just watching happening. We know that adaptation is the way forward.”
He added that there is “widespread ignorance” among young people of how much it costs to retire, and said the government should find “more innovative ways of getting younger people to think about lives [that] frankly they can’t conceive of at the moment – when they’re in their eighties and early nineties”.
“Raising the state pension age, which saves the government money but increases pensioner poverty, as many people have already stopped working by their sixties, is a red herring,” he said. “To successfully confront this challenge, the approach to financial management of today’s and tomorrow’s young people will need to change.”
