Aviva warns on later life redundancy threat to pension pots

Workers who delay boosting their pension pot until the last ten years of work could be risking their retirement as more than 25% of the over-55s are out of jobs due to illness or redundancy, according to Aviva.

The warning comes after the government said people must work longer as longevity rises, as reflected in the acceleration of the raising of the state pension age (SPA).

However, Aviva said the practice of boosting retirement savings in the last ten years of work may be risky because of the increased chance of illness or redundancy in this period.

The insurer's latest Real Retirement Report found 11% of the over-55s had to stop work due to poor health while 15% of respondents were made redundant between 55 and 65.

A further 9% said they were forced into early retirement and 8% were unemployed for more than three months during the decade from age 55.

Once out of work, 74% of respondents said it is harder to find employment when aged over 55 than earlier in life.

Aviva said 34% of respondents found an unexpected end to their career meant they had to cut back in retirement.

The figures are particularly relevant given government wrangling over the accelerated SPA rise.

Last week, secretary of state for work and pensions Iain Duncan Smith and pensions minister Steve Webb were grilled by opposition MPs over changes to the SPA.

MPs said women born in the 1950s face up to an extra two years before they can claim their pensions under plans to raise the SPA to 66 by 2020 instead of 2026.

At the same time, public sector workers will be forced to work longer as their retirement ages will be linked to the SPA.

Webb has repeatedly said people must be willing to retire later.

In response to a written question yesterday, Webb said the government is keen to help older people stay in the workforce, as demonstrated in its removal of the default retirement age (DRA) in April.

He added the government's Age Positive initiative aims to improve businesses' perception of older workers.