A new report shows the squeezed middle are more likely to stay on in work until state retirement age with larger numbers of wealthier people retiring early and poorer people dropping out due to sickness.
Middle earners are more likely to stay in work until state retirement age, with early retirement increasingly the preserve of the wealthy and poorer people more likely to stop working due to ill health, according to a new report.
The study by the Institute for Fiscal Studies [IFS] in partnership with the abrdn Financial Fairness Trust, found that employment rose for middle earners in the 2000s and 2010s at a significantly higher rate than for other workers, up from from 59% in 2002–03 to 76% by 2018–19 and considerably higher than that seen among the poorest fifth (46%) or the wealthiest fifth (65%).
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.
The report also found that many more people are in employment in their late 60s and early 70s in England, compared with 20 years ago, but 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. The IFS says 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: “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.”