Increasingly it is the wealthy who retire early, while poorer
people are more likely to stop working due to ill health. And it
is those in the middle who are most likely to remain in paid work
until state pension age.
These are the key findings of new IFS research released today as
part of the Pensions Reviews, in partnership with the abrdn
Financial Fairness Trust.
Focussing on people aged 55 to 64 in England, we find that:
-
The increase in employment seen during the 2000s and
2010s was greatest among those with average levels of
wealth. The employment rate of the middle fifth (in
terms of wealth) rose sharply from 59% in 2002-03 to 76% by
2018-19. This employment rate is considerably higher than that
seen among the poorest fifth (46%) or the wealthiest fifth
(65%).
-
Early retirement is increasingly a preserve of the
wealthy. Back in 2002-03, the fraction of those who
were retired aged 55-64 was fairly similar across the wealth
distribution: 20% in the poorest fifth compared to 28% for the
wealthiest fifth. In contrast, by 2018-19, only 7% of the
poorest fifth were retired, while for the wealthiest fifth it
was still 24%.
-
Many of the poorest report being out of work for
health-related reasons. 39% of the poorest fifth in
2018-19 were not in the labour force but not retired: most of
them reporting themselves as permanently sick or disabled or
(to a lesser extent) looking after family. This is unchanged
from 2002-03 and compares to only 9% of people in both the
middle fifth and the wealthiest fifth.
Many more people are in employment in their late 60s and early
70s in England, compared to 20 years ago. However, the patterns
of work are very different to those seen below the state pension
age:
-
Wealthy people are disproportionately likely to be in
paid work in their early 70s. Among people aged 70-74,
the employment rate is 15% for the richest fifth, compared to
11% for the middle and 6% for the poorest fifth. This is
consistent with existing research that finds that those who
work beyond state pension age often do so because they enjoy
the work or to keep active, rather than for financial reasons.
People working above state pension age are disproportionately
likely to be self-employed or working fewer than 16 hours per
week.
Jonathan Cribb, Associate Director at IFS, and the author
of the report, said,
“As some in their late 50s and early 60s accumulate high levels
of wealth, they take the chance to retire early. In contrast, the
poorest in this age group often stop work for other reasons, most
notably poor health, and spend long periods on state benefits.
One of the most remarkable changes of the last 20 years has been
the big increase in the numbers of people on average levels of
wealth who carry on working until their mid 60s, and this is not
simply due to increases in the state pension age. These people
often don’t have the financial security to retire – for example
many have an outstanding mortgage."
Mubin Haq, Chief Executive of the abrdn Financial
Fairness Trust, said,
“Twenty years ago, retiring early was fairly similar across all
income groups. Increasingly, it is the wealthiest who are able to
take advantage of this privilege, with early retirement
plummeting for the poorest. Instead the latter face high levels
of being locked out of the workforce, mainly as a result of
disability and sickness.
The reduced ability to work in the years before retirement is a
major concern. Not only are social security levels inadequate,
resulting in high levels of hardship, but being out of work
reduces the ability of this group to save towards a private
pension.”
ENDS
Notes to Editor
Understanding retirement in the UK is an IFS report by
Jonathan Cribb for the Pensions Review.
