UK – The Bank of England has warned that older people are rejoining the workforce due to a fall in the income from defined contribution pension schemes.
“There are good reasons to believe that there has been an increase in the supply of older workers, at least in the recent past,” the central bank said in its latest quarterly Inflation Report.
“The sharp fall in equity prices from late 2000 to early 2003 reduced the expected pension income of those in defined contribution schemes, and individuals’ stock of wealth more generally.”
The warning follows a comment by the bank in May that concerns about pensions were in part behind the fact that there are now more people of retirement age in the workforce.
The BOE said today: “Earlier declines in annuity rates, which determine the annual income that a given stock of wealth can purchase, could also have affected expected retirement income. So individuals may have decided to continue working to provide for greater consumption in retirement.”
Among the reasons for the UK’s “unusually subdued” wage growth was possibly extra inward migration or delayed retirement which “may have helped to keep wages in check during the past few years”.
The bank has issued warnings on pension before. In August chief economist Charles Bean said the closure of defined benefit occupational pension schemes has added to the recent “upward pressure” on house prices in the UK.
Elsewhere in the UK, food company Big Food said the pensions deficit issue which had threatened its takeover by Iceland’s Baugur was now resolved in principle.
It said an agreement has been reached in principle with the pension scheme trustees in relation to the ongoing funding of the deficit in the event of a change of control.
Some recent takeover deals, such as Marks & Spencer and WH Smith, have been derailed by pension deficits.