November 1, 2012 10:31 am

Time for the ‘three stages of life’ model to be retired


Retirement age is as much in the mind, as in business practice. The idea that a life consists of three components of predetermined length – growing up, working, and resting after work – is deeply embedded in our psyches and personal finances. It has been, and remains the standard pattern of a human life.

But as a financial model it is coming apart at the seams, because we are all living longer and those born in the demographic bulge known as “baby boomers” are now retiring. We know this means those of working age must work longer and pay more into their pensions, and those who have retired, must make do with less.

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As a pattern of life the three-part model suits many, perhaps even most. For a growing number of us, however, it does not. It perpetuates an anachronistic view of a balanced life, but because it is so deeply embedded in the popular belief system, it inhibits the exploration and adoption of more flexible patterns of life, more suited to today’s realities.

It is not just the enormous waste of skills, experience, wisdom and knowledge that occurs when able people in their prime are expected to retire from the workforce. The now-unwritten rule of a default retirement age, and the effect it has on people’s expectations and career plans, also deter younger people from taking charge of their own working lives and adopting unconventional career trajectories.

Reaching a predetermined age at which we should retire, on which the three-part model is constructed, has survived because there has not been sufficient reason to abandon it. Until now.

I am intrigued by Executive Alumni, a new venture which connects former executives with small and medium-sized companies that need the skills and know-how of experienced people in their 50s and 60s, but cannot justify the expense of market rates. It enables companies to employ these experienced people on unconventional compensation arrangements for limited periods or part-time.

I agreed to join Executive Alumni as chairman, because I believe that to rebalance the UK economy away from an unhealthy dependence on financial services, we need to move executive talent into SMEs. It is here, in the corporate undergrowth, where the new economy is being created.

To strengthen the UK Mittelstand we must reduce the mortality rate of small businesses, widen the horizons of medium-sized firms, and improve the quality of management in the SME sector as a whole. Intermediaries, such as Executive Alumni, have a vital role to play here, in helping to move idle executive talent to where it can create the most value.

There is a need for such executive talent at SMEs, but the latter have not often had the benefit of it, because it is assumed that they cannot justify the expense of hiring top-dollar executives. Now they might not have to. We have been struck by the number of talented executives who want a slow, sometimes very slow, glide-path to full retirement, and would welcome the opportunity to work part-time for a lower than market rate, for a high-potential, unlisted firm struggling with a shortage of management resources.

Together, these executives represent an invaluable resource for the UK at this important time of economic restructuring.

We all know that the only solution to the pension crisis is to work longer, save more and expect less. If we concentrate on the work longer imperative, the other pieces might fall into place.

In any case, it is time to shift the debate. We should stop discussing what is an appropriate retirement age, and start discussing whether we need a retirement age at all.

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