November 23 2014 Latest news:
Monday, August 4, 2014
Professionals reach their earning power peak in their 40s while salaries drop to their lowest level during their 50s, according to new research.
Saving potential is at its lowest during the decade pre-retirement as average wages drop and household spending goes up, pensions and retirement specialist Friends Life said.
Workers can expect a salary drop of £400 a year once they turn 50, according to earnings data from the Office for National Statistics (ONS).
The majority will see their salary peak between the ages of 40 and 49 to an average of £33,459, according to Friends Life which analysed the ONS figures.
The average income falls to £33,059 when people turn 50, and by a further 6% to £31,052 when they reach 60, a Friends Life spokeswoman said.
The pensions specialist found that those aged between 50 and 64 were left with just £231.53 a week once necessary expenses like household bills, living costs and transport costs were accounted for.
The fall in earning power for this age group coincided with an increase in household spending from an average of £196.40 to £235.80 per person per week, as they spent more on leisure activities, alcoholic drinks and buying household goods, the spokeswoman said.
Research showed that money was most squeezed during the decade pre-retirement, with more people at risk of having debt in their 50s.
One in four people said they would consider taking 50% or more of their pension pot as a lump sum at retirement, and one in six said they planned to use the money to pay off debt, Friends Life said.
Colin Williams, managing director of corporate benefits at Friends Life, said: “Our analysis shows that most people will reach their earning peak earlier in their career than they may think.
“Then they will see a fall during their 50s, just at the point that spending increases and people will be relying on savings for retirement.
“This highlights how important it is to take action when your saving potential is at its highest during the early part of your working life, particularly to avoid having to use pension savings to pay off any remaining debt.
“The good news is, the earlier you take action to prepare financially for the future, the more you will do to secure the lifestyle you aspire to during retirement.”
Edward Cooper, head of employment at law firm Slater & Gordon, which has carried out research into age discrimination in the workplace, said a huge area of concern for older employees was the fear of being made redundant.
In a survey of 2,061 people aged over 40, the firm found that three quarters of people said they believed they would struggle to find a new job because of their age.
Of those that thought their age might lead to them losing their job, more than half said they worried it was because they were more expensive, with others anxious that their company valued youth over experience, the research said.
Mr Cooper said: “These figures from the ONS evidence what we see in practice; namely adverse assumptions about older workers not being as effective as younger workers.
“In too many industries age discriminatory attitudes persist as our recent survey suggested.”