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The recent increase in the state retirement age in the UK has led to a record number of employees among 65-year-olds, and has also encouraged those living in poorer areas to work longer.
A survey by the Institute for Fiscal Studies, released on Tuesday, found that about 55,000 more 65-year-olds were in paid work in 2021. gradually raising the retirement age, from 65 to 66, from the end of 2018 to the end of 2020.
The reform resulted in an additional 7 percent of men and 9 percent of women remaining in employment, making the male employment rate between 65 and 42 percent – the highest since the 1970s. The female employment rate rose to the most likely all-time peak of 31 percent.
Emily Andrews, deputy director of evidence at the Center for Better Aging, the charity that funded the research, said it showed that a higher retirement age was “an effective policy to extend working life among employees.”
However, the survey also contained several warning signs for policymakers as they prepare to raise the retirement age to 67 by 2026 and as an independent audit begins to consider further increases to manage fiscal pressures of an aging population.
First, people living in poorer areas are much more likely to stay at work while waiting to qualify for a state pension. Following the change, the employment rate in the fifth poorest local areas rose by 13 percentage points for women and 10 percentage points for men – compared to a corresponding increase of only 4 and 5 percentage points in the fifth most prosperous areas.
Renters tended to stay at work longer than homeowners, and those without qualifications were more likely to do so than those with a university degree, research has shown, suggesting that financial need was the driver of their decisions.
Most of those who have postponed retirement are likely to be better off financially as a result, even if they would rather stop working earlier and have more free time, IFS said. This was because they mostly worked full time, earning more than lost retirement income.
Jonathan Cribb, an assistant director at IFS, said this suggests that there is an “unfulfilled wish that many approaching the state retirement age can work part-time or more flexibly than they currently do.”
More than 90 percent of those affected by the increase in the retirement age have not changed their retirement plans, the IFS said. Most still retire before age 65, either because of health problems or because they can afford it, while a significant minority choose to work longer.
But a smaller group – including 5,000 unemployed and 25,000 incapable of working for health reasons – was particularly hard hit, IFS said, because they were entitled to much less assistance through the benefits system than they would have been if entitled to a state pension.
Andrews said this points to the need for the government to “seriously address meaningful support to help unemployed people in their 60s return to paid work” so that further raising the retirement age “would not further harm those already in disadvantaged due to the age of the labor market ”.
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