Why workers should prepare for the possibility of long-term sickness - Sarah Coles

For them, the idea of joining the flood of people leaving the workplace in their 50s and early 60s may seem like a dream. But in reality, for many people going through it, it’s a nightmare.

They’re not giving up the day job for positive lifestyle reasons: they’re too sick to work.

This week’s employment statistics from the Office for National Statistics revealed that the number of people who are classed as economically inactive because of long term sickness has hit a record high.

After gradually dropping for the past 50 years, the proportion of people who are considered to be inactive has been rising since the start of the pandemic.

It’s now at 21.7 per cent – up 1.5 percentage points since the onset of the pandemic. Three fifths of the rise has been because of an increase in inactivity among those aged 50-64.

They give a variety of reasons for this – including caring for someone else, and early retirement – but being sick, injured or disabled is the main reason why people in this age group are no longer in the labour market.

The official figures show that sickness or disability has driven 1.4 million 50-64-year-olds to leave the workforce, but Jonathan Haskel, Economics Professor at Imperial College Business School and an external member of the Bank of England Monetary Policy Committee, thinks this is an understatement.

He published an academic paper highlighting that the ONS survey doesn’t allow people to list long term sickness as a secondary reason, so it may be part of an awful lot of these decisions, without being recorded as such.

He calculated that long term sickness was responsible for 88 per cent of the change between the start of the pandemic and the start of this year.

The decision to leave work early seems to be one made very recently for a lot of these people – rather than part of a long-term plan.

In March, the ONS separately surveyed people aged 50-70 who had left the workforce since the start of the pandemic and found that 63 per cent had left work sooner than they had expected, including 77 per cent of those in their 50s. Some 47 per cent of them had retired and most said it was their choice to leave – but 13 per cent of them said they left because of illness or disability.

Part of this is likely to be the result of the spread of Long Covid, which is now affecting an estimated two million people, and is most prevalent among people aged 35-69. Almost half of those with the condition say they have had it for at least a year, and one in five say it has limited their daily activities a lot. The impact of Covid stretches beyond ongoing symptoms too. There will be people who have reduced immunity, so they felt unsafe at work during the pandemic, and decided to leave.

There are also people whose conditions will have worsened after not receiving timely NHS care either during the pandemic, or in the backlogs since.

One ONS study looking into care at the time quoted one respondent saying they ‘had more chance of getting an appointment with God’ than with their GP.

Enforced periods at home may also have meant they were more sedentary or gained weight, which could have exacerbated some conditions. And periods of isolation could have had a significant impact on people living with mental illnesses.

All of these things could have made the difference to people who previously worked while managing a long-term condition, who can now no longer manage.

The HL Savings & Resilience Barometer shows that people in ill health have lower financial resilience across the board, so they may have been in a worse position to begin with.

Certainly if they have been forced to change their plans in a hurry, there’s every chance it has dealt a major blow to their finances. The ONS survey found they were more likely to be worried about money than those who left work early before the pandemic.

It’s a reminder that while we may plan a long and healthy working life, we may end up being forced to rethink if life throws us a curve ball. So it’s worth considering what plans we have in place, and whether it’s enough to protect us.

A good place to start is your employer.

Check the conditions of your paid sick leave – including how long it lasts and what level of pay you will receive. Also ask whether you have any income protection in place through the workplace.

Some policies will cover you for a fixed period, and others until retirement, so if you have cover, check how long payments would continue for. If you have concerns about the level of cover on offer – or there isn’t any - you can look into buying a policy privately. This is a relatively expensive form of insurance, compared to something like life insurance, but can be a real lifeline.

Next you need to think about your retirement savings, because leaving the workplace early brings a double-whammy of having less time to make contributions, and needing an income for longer.

While it’s difficult to make firm plans for something we can’t be certain about, it’s worth doing the calculations to see where you would stand. If the figures look dire, consider whether you can afford to increase pension contributions, make the money in your pension work harder through investments, or whether there are any alternative ways to make ends meet in the intervening years – like downsizing.

Being forced to leave work early because long term sickness is never going to be the kind of later life we had hoped for. But putting the right plans in place will give us the chance to make the best of it.

House price Hokey Cokey

Figures out this week revealed that average house prices were up 15.5% in the year to July – almost twice the 7.8% rise in the year to June. In Yorkshire and The Humber the rise was even more striking – up 17.7%. However, all is not what it seems. This is the latest step in a house price Hokey Cokey, and is the result of changes to the stamp duty holiday last summer. It doesn’t affect the outlook for the market, which is facing real challenges.

The July figure reflects the distorting impact of the end of the most generous period of the stamp duty holiday last year. There was a burst of demand last June, as people rushed to get sales over the line before the deadline – pushing prices up. As a result, we had a lull in July where prices fell back month-on-month and annual rises slowed to 7.1%. It means we’re comparing this year’s figures to a lull.

Meanwhile, the overall outlook still looks challenging. Underlying demand has been falling since May – the longest stretch of shrinking demand since the onset of the pandemic. The announcement of the Energy Price Guarantee, capping annual prices for an average user at £2,500 this winter, will have come as a relief to millions of people, but even at this level, sky high bills will be a stretch. Meanwhile, if the Bank of England raises rates again next week as expected, it’s going to make higher house prices even less affordable.

We can expect the maths to stop adding up for increasing numbers of buyers, and their mortgage lenders, which could dampen price rises.