Half a million older people have been squeezed out of the workforce during the pandemic and could face a retirement disaster as the cost of living crisis bites.

More than 493,000 people aged 50 to 70 have stopped working since the pandemic began, with an additional 160,000 leaving their careers during 2021, figures from the Office for National Statistics showed. 

Redundancies were higher in older workers versus all other age groups throughout the pandemic and once unemployed this cohort also found it the most difficult to return to work.

However, pensioners are among the most vulnerable to the rapidly rising cost of living, as they tend to spend a larger portion of their income on heating. 

Tom Selby of AJ Bell, a stockbroker, said: “The implications of mass early retirement could be seismic and there is a real danger tens of thousands of people risk sleepwalking into hard times in later life.

“As the UK emerges slowly from the pandemic and headlong into a cost-of-living crisis, we see an economy that has been stripped of almost half a million older workers.” 

The state pension will fail to keep pace with rocketing inflation this April, rising by 3.1pc versus an overall increase in prices of up to 8.7pc, according to forecasts from the Centre for Economics and Business Research, a consultancy. This means 12 million pensioners will lose hundreds of pounds worth of spending power over the coming months. 

Pensioners will have to spend an additional £2,246 a year to meet their outgoings if inflation reaches 8.7pc. However, the state pension will increase by just £289 a year.

Energy bills will rise by £693 a year next month, which is likely to be followed by an even larger jump in October. The sharp increase is equivalent to more than four weeks’ worth of the average state pension, which is rising to £8,530 in April.

Helen Morrissey of Hargreaves Lansdown, another stockbroker, said many of those who retired over the last year had not planned to but were instead compelled to leave because of caring responsibilities or if they felt unable to get another role. 

“The over 50s left work in their droves in the last few years. We need to ensure the way we work is not essentially forcing older people out of the workforce and a more flexible approach may be needed,” she said. 

Men between the ages of 50 and 70 with a degree were the most likely to retire, with more than 42,000 extra in this cohort doing so between April and September 2021 compared to pre-pandemic levels. 

Stephen Lowe, of pension firm Just Group, said it was “concerning to see that many people have left the workforce earlier than they had expected” because of the serious impact it would have on their finances in both the short and the long term.

Mr Lowe said pensioners would be heavily impacted by rocketing energy bills and many would need to draw on their own sources of funding, with nearly half of people aged 50 to 60 saying they were using savings or investments to get by.