The golden years
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Many HGV drivers are tempted to work on beyond normal. retirement age, but what effect does this have on their pension prospects?
Words: Mike Sherrington image: Bob Tuck The proportion of older HGV drivers is increasing and is likely to get even higher as the industry moves out of recession, according to the Freight Transport Association (FTA).
Figures produced by Skills for Logistics show that in October 2008 the majority of working drivers in England (54%) were aged over 45 years. Figures for the over-45 age group were similar in Scotland (52%), Wales (51%) and Northern Ireland (42%). In all three countries the number of drivers under 25 was 2%.
The lack of young drivers coming through is causing concern at the FTA, which forecasts a skills shortage following economic recovery. Its general manager of training Nic Allen says: "Traditionally, the majority of those working within the logistics industry have been men over the age of 40. With widespread redundancies and job losses across the entire sector, we are deeply concerned that we will lose that skills base."
One of the ways of overcoming this problem is for drivers to work on past retirement age. This is perfectly legal, providing drivers undergo an annual medical check. and many drivers choose to do this Ruth Pon, the Road Haulage Association director of employment affairs, says: "Many people working in road haulage reach retirement age without any pension provision other than the state pension, which they regard as not being enough to meet their needs, so they are quite happy to carry on working for a while."
But what happens to employees' pensions if they decide to work past retirement age?
There are two types of pension: the state pension and private pensions. The state pension is funded by National Insurance contributions and the last government has made a significant change to rules governing eligibility for a full state pension.
From April this year you now only have to pay 30 years NI contributions to get a full pension. Previously you had to have 44 years worth of contributions if you were a man and 39 if you were a woman.
A state pension cannot be taken early. It is currently only payable when women reach the age of 60 and men 65, although that is likely to change soon, The previous government had plans to harmonise the age when pensions are payable to 65 for both men and women. This was to be achieved by 2020 and it also wanted to increase the overall age when pensions are first payable to 68 in stages by 2044. All the indications are that the new government will speed up this process It has already announced it will carry out a review into pensionable age.
If you decide to carry on working after state retirement age, there are three options. You can receive your state pension and add it to your salary. However, pension is taxable so your tax bill will increase. Alternatively, you can defer taking your pension in one of two ways: if you put off claiming state pension for at least five weeks you can earn a pension increase of 1% for every five weeks you put off claiming. If you put off claiming for at least a year you can receive a one-off lump sum payment and your pension paid at the normal rate.
There are no restrictions on whether you can continue working if you take out a private pension, although with most schemes it is difficult to carry on making contributions to pensions once statutory retirement age has been reached. Also, some of the larger firms in the sector actively discourage their workers carrying on after this age.
This is true of Royal Mail, which employs HGV drivers in both its Parcelforce and mail operations.The right to work on after 65 is only granted if the post is difficult to fill and it is an important business requirement not to leave it vacant.
A spokesman for the United Road Transport Union describes the pension arrangements across the industry as a mishmash, but the general rule of thumb is the bigger the company, the more elaborate the pension arrangements and the harder it is to carry on working after retirement age.
Many drivers have little alternative but to carry on working as the work is there and they find they cannot afford to live on £9165 a week, which is the single person's state pension or the £156.15 awarded to a couple. •