A study by the Institute for Fiscal Studies finds that raising the state pension age has resulted in more people staying in work – usually the job they were already in – but most still retire early.
The latest increase in the state pension age to 66 has significantly boosted the employment of both men and women, particularly those on lower incomes, although most people have already retired by this point, according to a new study.
The Institute for Fiscal Studies says the rise from 65 to 66 for state pension age which occurred gradually from 2018 to 2020 has led to 55,000 more 65 year olds being in paid work.
Women and the poorest were more likely to stay in work – an additional 7% of men and 9% of women stayed in paid work at age 65 and, in the most deprived fifth of areas, women’s employment rate at age 65 rose by 13 percentage points and men’s by 10 percentage points. In contrast, in the most prosperous areas, female and male employment rates at age 65 rose by just 4 and 5 percentage points respectively.
The IFS says that by mid 2021 the male employment rate at age 65 rose to 42% and the female rate to 31%. Both are the highest seen since at least the mid 1970s and, at least in the case of women, are very likely to be the highest rate ever in the UK.
However, the IFS says more than 90% of 65 year olds (around 640,000 of them) are unlikely to change whether they are in paid work at age 65 purely because of the higher state pension age. It states: “This is in large part because the majority of men and women have already left the labour market before their 65th birthday, while some others would have stayed in paid work even if the state pension age had remained at 65.”
Other key findings include:
Laurence O’Brien, a Research Economist at IFS and an author of the report, said: “There have been striking increases in employment of 65 year olds in recent years as the state pension age rose from 65 to 66. Indeed, employment rates for this age group have reached record highs. However, it is still the case that over 90% of people do not change their employment decision at age 65 purely as a result of the higher state pension age. This is mainly because most people have already left the labour force before turning 65. For most 65 year olds – around 640,000 of them – a higher state pension age simply results in lower income rather than changing their work patterns.”