It’s the Friday before your sixty-fifth birthday and there’s a cake in the meeting room that somebody picked up from Tesco on the way in. Your boss gathers everyone for a speech thanking you for your decades of service. He then shakes your hand and hands you a gold watch with your name engraved on the back of it, everybody claps, and off you go on your merry way.
Thirty years at that company. You moved up the ranks, endured every company peak and every slump. You’ve weathered the economic storms, watched your colleagues have families, watched their kids grow up, many of these people you have spent more time with than your own family. And now it’s all over….finally. You get the time to spend with your family, play golf, go on cruises around the world. Forty odd years of hard graft, and all well and truly worth it.
But is it really?
In today’s article I want to do two things. First I’d like to examine the extent to which this deal was actually “worth it”.
Next, I’d like to explain why I think that this model of retirement is, most likely, no longer an option for my generation, and explore what may replace it.
The good years
The concept of retirement, simply put, is a trade. 40 years of service, and after sufficient time, you earn the right to enjoy a life of peace and leisure.
The odd thing about that trade is how the leisure gets delivered. Across a working life it arrives in small rations, evenings and weekends and four or five weeks a year, and the bulk of it is held back and paid out in a single block at the end, all at once.
It comes in that shape because of where it came from, and the earliest versions of the model had nothing to do with helping people accumulate free time. They were arrangements for what to do with people who had been worn out in service. Augustus set up a treasury in AD 6 to pay legionaries a lump sum after twenty years, and that logic ran for centuries: you serve until you are no longer much use for serving, and then the state settles up with you. The civilian version arrived very late by comparison. Bismarck’s Germany introduced an old age pension in 1889 and set it at seventy, and Britain followed with the Old Age Pensions Act in 1908, also at seventy, means-tested, and paid to the small number of people who had got that far. Nobody in 1908 was planning two decades of golf. The pension was a provision against destitution for people who had outlived their capacity to work.
This model then got carried over to the industrial revolution, and now to the information age. What changed along the way is that people started living long enough for the last stretch to become a phase of life in its own right, and somewhere in the second half of the twentieth century a small insurance against dying poor turned into the reward at the end of a working life.
One of the things I never quite understood about retirement, is so many people, who are postponing living their life, until they’re elderly, makes very little sense to me. There’s so much to experience, explore, and waiting until you’re old, have health problems and can’t enjoy the world in the same way, sounds like a genuinely crazy bet to me. Tomorrow is not promised, so building your life around a payoff that lands in forty years doesn’t sound particularly logical.
So why would anybody take this deal? There are a few key reasons which make the deal sound a little less illogical once you dig a bit deeper.
The pension promise
Not all pensions are made equal, so it’s worth being precise about the particular type of pension available in this model, and how far it had travelled from the settlement paid to a worn-out legionary. The 1908 state pension was five shillings a week, roughly £25 a week in today’s money, means-tested, for people over seventy, and its job was to keep you off the parish. What the post-war company pension offered was a different animal: a fixed fraction of your final salary, paid every year until you died, rising with prices, and in most schemes continuing to your spouse afterwards. It’s called a defined benefit pension, and the employer carried the risk of the markets going wrong and of you living to ninety-four.
That was what somebody deciding in 1985 whether to stay put had in front of them. It was worth more the longer you stayed, it was guaranteed by somebody other than you, and it converted three decades of loyalty into an income you could not outlive.
Home ownership
The second reason is that home ownership made a lot of sense. The average UK property cost £74,638 at the end of 1999 and £152,464 at the end of 2004, doubling in five years while the people living in it did nothing at all. In fact for many of my parents and grandparents generation, they earned more from the appreciation on their properties than they did their salaries. ONS figures had the average London home gaining £63,000 in value over the year to mid-2014, against a typical full-time worker in the capital earning £35,250 before tax.
The catch is that you couldn’t get near one without a mortgage, and you couldn’t get a mortgage without proving you could pay it, which meant a stable job. So the decades at one company did two key things. They filled the time until the pension arrived, and they allowed you to invest in an appreciating asset.
Once it was paid off, the pension only had to cover living.
It was also just the done thing
The third reason is simple. Most people weren’t aware of an alternative. Leaving a good employer to try something else read as recklessness, portfolio careers did not exist as a concept, and everybody around you was doing the same thing. You were not weighing up options and picking this one. This was just what the majority of people did.
Put those three together and I can understand how the deal makes a little more sense.
If this resonated and you want to start moving towards work that fits, upgrading gets you the practical pieces on the big career decisions, all for the price of a cup of coffee.
Why it’s no longer on offer
The pension, the house and the absence of any alternative are what made the deal work, and all three have gone or are going.
The old pension was a promise. The company owed you a set amount every year for the rest of your life, worked out from your salary and the number of years you had been there, and if you lived to ninety-four that was their problem. You could leave and keep what you had built up, but it got frozen at the salary you were on when you walked out. Stay, and the whole thing was calculated on what you were earning at the end, after thirty years of pay rises. That is a large part of what the thirty years were buying.
What you get now is essentially a savings account. Your employer puts a small amount into it each month and that is where their involvement ends. Whatever is in the account when you stop is what you live on, and when it runs out, it runs out.
Almost nobody in the private sector is still on the old pension plan, and the part that matters here is that a savings account doesn’t care how long you stay. It comes with you when you leave. Thirty years at one company and thirty years at ten companies come out much the same. The government’s own pensions review this year put fifteen million people on course to fall short of what they’ll need.
The ability to buy a home is now much less of a realistic incentive than it used to be. A survey of two thousand under-forties by Zoopla found that 42% of those who don’t own have given up on the idea of ever owning. In places like London, house prices have become so expensive relative to wages, that ownership now feels like something that is reserved for those with mega rich parents. And so most people have just let go of that idea.
A mortgage is a thirty-year commitment to a specific geographical location, which means a job within reach of it. The people who have given up on owning are the same people with nothing much tying them to one employer.
There’s a fourth thing, which has less to do with the money. A forty-year deal assumes the work you trained for will still exist in forty years. That assumption held for previous generations, but is no longer the case. The impact of AI on white collar work is happening on a timescale of years, not decades. As a result staying somewhere for thirty years is no longer the safe option it looks like.
Fifty years
Lynda Gratton and Andrew Scott ran the numbers in The 100-Year Life, and the numbers paint a pretty grim picture.
When Gratton and Scott wrote the book they reckoned half the children born today would live to a hundred. Live to a hundred and stop at sixty-five and you have got roughly forty years of earning to pay for thirty-five years of not earning. Save the sort of amount people do save, around a tenth of your income, and expect to live on half of what you were earning, and you’ve got no chance.
Every piece of advice anybody has ever given you was built for a much shorter and more linear career, where you chose your subject at sixteen, qualified by twenty-two, were established by thirty and senior by forty, then coasted a while before collecting. The whole apparatus, careers advisers and graduate schemes and thirty-under-thirty lists and the particular dread of turning thirty without a senior title, assumes you’re part of a race that finishes at sixty-five.
I’m twenty-five, which means I’ll be working into the 2070s, and I find that easier to think about as forty-five years I get to shape than as evidence I should have sorted myself out by now.
A working life that long has far more room in it for distinct stages. The old shape was: school, then work, then a stop at the end. What replaces it is a life with more stages and therefore more transitions in between, so changing direction stops being a crisis and becomes something most people go through more than once. It asks people to get familiar with adapting, and to be comfortable figuring things out as they go.
Unfortunately, almost nobody is taught how to do it, because the system was built to get you into one thing, never to help you navigate through several. Employer investment in training has fallen 36% per employee in real terms since 2005 and four in ten employers now provide no training at all, so it is not going to come from work either.
Rumbo is what my co-founder and I built to close that gap. It works through what you are like, what you can already do and what is worth learning next, where the gaps sit in the industries you are drawn to, and how much risk your circumstances let you carry. Then it builds you a plan: what to do next, who to talk to, and how to tell whether any of it is working. Have a look here.
Taking it in the middle
Now I know what some of you are thinking. Does this mean I’m doomed to a life of endless graft?
Only if the shape of a working life stays as it is. What I think this calls for is an updated model, and there are plenty of people already working towards one.
Look at how a film gets made, for example. A producer options something, spends a year or two assembling money and a team, works at full intensity through development and the shoot and the edit, delivers it, and then stops. There’s a gap. Then another project arrives, usually related to the last one and usually a step on from it, with some of the same people and some new ones. Nobody involved thinks of the gap as unemployment. It’s the part where you read things, take meetings that aren’t about anything yet, and work out what you want to do next.
It’s also much closer to how people worked for most of human history. E. P. Thompson’s 1967 essay on time and work discipline describes pre-industrial labour as task-oriented, running in bursts around harvest and slack in between, with the boundary between work and life barely drawn at all. What the factory did was replace that rhythm with the clock, and the clock is where the idea comes from that a working life should be one continuous forty-year block with a single stop at the end.
So the alternative to saving all your living for the end is to take some of it in the middle, in pieces, deliberately. A few months between jobs. A year doing something badly paid that you wanted to try at thirty-four, not at sixty-seven. Four days a week for a stretch while the children are small. A sabbatical that costs you a promotion.
I took seven months in Latin America last year, funded by taking a job I wouldn’t otherwise have taken. It was the best seven months of my life. Had I not taken that trip, I’m certain I would not be working on what I’m currently working on.
Where that leaves you
There’s no retirement party in the version I’ve described.
What changes is the question you’re answering, because it stops being how quickly can I get to the end of this and becomes what do I want to be doing for the next forty years, which is a much harder, and much more exciting question.
To read next
Everything in the paid guides also comes as a set of workbooks. They take one career decision at a time and give you the room to work it through on paper, so you finish with your own numbers and your own answers written down in front of you. They're a one-off, and they're yours to keep.