Embrace the brave new world of retirement The toxic combination of unemployment and ill health among older people, combined with rising life expectancy, is leading to many elderly people having less to live on. Most people who do not have a gold-plated final salary pension scheme (nowadays virtually unknown outside the public sector) buy an annuity with their pension pot when they hit retirement. This provides them with an annual income. Since annuity rates are based on complex calculations about how long people live, rising life expectancy pushes annuity rates down, so people can buy less of an annual income every year. In short, the ONS figures show a world in which we need to work longer, but are often not healthy enough to do so, or face particular difficulties in the job market. When we stop work, through need or inclination, our credit-crunch-hit pension pots buy us less to live on than ever before. Looming above this situation is the spectre of care costs, which are forecast to spiral in the coming years as life expectancy continues to speed ahead of healthy life expectancy. How will the new generation of bowed-down retirees bear the cost? Is the future for retirement as bleak as it seems? Ros Altmann, the director-general of Saga, thinks not. "A social revolution is under way and traditional stereotypes are being overturned," she said. Her solution for an ageing population is for people to work longer, and more flexibly - with more people than ever choosing to work after state pension age. The ONS figures show that more women than men stay working after the state pension kicks in. Around 12.5pc of women and nearly 12pc of men are still working at this time. "Of course, women's pension age is lower than men's, but the trends are clear," she said. Older women are increasingly involved in the labour market. The majority of both men and women still working after state pension age work part time, which she describes as "a very healthy trend for the future." Mr Sinclair also subscribes to the "working for longer" solution. He goes as far as to say that those approaching retirement may have a moral reason to continue to contribute. "We need to take a citizenship approach to retirement," he said. Continuing as a productive member of society is both a responsibility and a right. However, he notes that an ageing workforce needs some adaptations, and is concerned that recent age-discrimination legislation may have an adverse effect upon Britain's work places. "I am worried that they may become 'age blind'," he said. You have to make sure there are not unintended consequences and that people get the support they need to continue working. Working for longer might sound simple, but it is not always as easy as it may seem. Although there is no longer a default retirement age, meaning that your employer cannot "pension you off" to make way for new blood, there is no legislation to support older people who want to work part time. Unlike the parents of young children, who have a legal right to request flexible working arrangements and to have them considered, older people must find their own way forward, together with their employers. Some could be faced with the unpalatable choice of working full time in a physically demanding job until they are 70 or not having enough money to live on. Ms Altmann said people needed to begin a "dialogue with their employers" before they approach state pension age. Mr Sinclair believes that people should also look to booming sectors such as the care sector itself as potential sources for jobs after retirement from a first career. "There will be a need for skills in these areas," he said. While all of these plans for working longer are very fine, there is a massive elephant in the middle of retirement's "social revolution." "Health needs to be put at the heart of all retirement planning," warned Steve Lowe, at annuity provider Just Retirement. For people to keep working and feeding their pension pots, they need to live healthier lives. He advises a health check at the same time as taking financial advice, while changes to your lifestyle such as giving up smoking and losing weight can also help boost your chances. Getting financially smart should also help. Statisticians understand that buying an annuity at state pension age might be an expensive mistake - if you can afford not to do so. It might sound somewhat morbid, but leaving your pension pot invested increases the chances that you will get ill before you buy an annuity - which in turn increases the amount of money that your annuity will pay you. Last April, the Government changed the rules that effectively meant you needed to buy an annuity by the age of 75. However, even if you do not plan for your pension to remain unannuitised for that long, even a few years can make a difference. Enhanced annuities, for those with health problems, can give you a far better rate than those for the healthy. It is worth checking whether you have any medical conditions that would qualify before buying an annuity, as well as shopping around for the best rates. New rules governing the sale of annuities from the Association of British Insurers are expected to make it far less easy for pension providers to offer default annuities with poor rates to their clients when they approach retirement, which should improve income somewhat. Far more people are phasing their retirement, opting for part-time or consultancy work while drawing a portion of their pension. Investors should have the same mindset regarding annuity options. This may mean investing part of their funds in one of these new products and using the balance to buy a conventional annuity, or gradually taking out a series of annuities over a number of years while keeping the balance invested. The brave new world of retirement may be bleak for some, but with a hefty dose of luck, work ethic and financial know how, you can minimise the shock.