House price boom and gold-plated pensions to blame for wave of early retirement

Surging house prices and gold-plated pensions have helped to drive a wave of early retirement since the pandemic, MPs have been told.

A house price boom in recent decades and generous retirement schemes that promise a guaranteed, inflation-linked income to retirees have prompted many financially stable over-50s to quit the workforce for good, said Tony Wilson, director of the Institute for Employment Studies.

“That’s a really big part of it, is housing wealth,”  Mr Wilson told the Commons business select committee. “The other is occupational defined-benefits pension schemes.”

Mr Wilson’s comments suggest Chancellor Jeremy Hunt’s efforts to pull older people back into the workforce may fall flat as few have incentives to do so.

Over 800,000 people have dropped out of the workforce since the start of the pandemic, according to the Resolution Foundation, with 76pc of them aged over 50.

Mr Wilson said many older people had stopped working because of the rising value of assets they own and “very generous” rules on accessing private pensions early have given them financial freedom.

Two thirds of the 50 to 65-year-olds who have left the labour market since the start of the pandemic own their homes mortgage-free, according to the Resolution Foundation. Many have also seen the value of their investments soar, with the average house price in Britain almost doubling since 2005.

Mr Hunt has made getting older people back into work a key focus of his upcoming Budget in an effort to jump start economic growth. Last month he urged over-50s to get off the golf course, telling them “Britain needs you”.

However, economists are sceptical about how successful this push will be. The Resolution Foundation has said Mr Hunt’s focus on “unretiring” is unlikely to yield much movement.

Kevin Hollinrake, the business minister, told MPs that companies should make it easier for people to work part-time and offer flexible hours to tempt older people back into jobs.

For many, deciding whether to re-enter the workforce will ultimately be a “lifestyle choice”, Mr Hollinrake told the select committee.

Making workplaces more attractive places is the “number one” way to get skilled older workers back into employment, he said.

“The way to do that is through flexible working.”

New rules being introduced by the Government will give workers a legal right to flexible work from their first day of employment.

Mr Wilson added that early retirement only accounted for part of the disappearance of older workers. Many have been driven out of employment because of long-term health conditions.

Problems with access to childcare also affect over-50s who often step in to look after their grandchildren, Mr Wilson said.

“One of the benefits of improving access to childcare will be to free up older people who want to go back to work but can’t because of informal care responsibilities,” he said.

Consultancy LCP said earlier this week that Mr Hunt was “barking up the wrong tree” with his focus on getting over-50s back to work, saying long-term sickness was a bigger factor in driving people out of the labour market.