Retirement Income  

Rise in working 65-year-olds due to pension age increase

Rise in working 65-year-olds due to pension age increase

Record levels of 65-year-olds are choosing to stay in work due to an increase in the state pension age, the Institute for Fiscal Studies has found.

Research from the IFS, published today (January 25), found about 55,000 more people aged 65 were in employment in 2021 due to the slight rise in state pension age from 65 to 66 between December 2018 and October 2020.

This change increased the employment rate of 65-year old men by 7.4 percentage points and of women of the same age by 8.5 percentage points.

Overall by mid 2021, the male employment rate at age 65 rose to 42 per cent and the female rate to 31 per cent - its highest level since the 1970s and, at least in the case of women, likely to be the highest rate ever in the UK.

The research also revealed those in the most deprived areas were more likely to be adversely affected by the policy age and forced to stay in work longer.

In the most deprived areas, women’s employment rate at age 65 rose by 13 percentage points and men’s by 10 percentage points. 

By 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 said it reflects the greater need for income at older ages among those living in poorer areas.

Jonathan Cribb, an associate director at IFS and an author of the report, said: “The sharp increases in employment have come in particular from those in poorer areas and for those who have lower levels of education, suggesting that without a state pension they cannot afford to retire.”

But he pointed out that of the 55,000 staying in employment, 35,000 are in full-time work even though only 20 hours of work each week at the National Living Wage would be sufficient for most to make up for the delay in the receipt of their state pension. 

Cribb added: “Given that a quarter of people working full-time in their mid 60s want to work fewer hours, this suggests there may be an unmet desire for many approaching state pension age to be able to work part-time, or more flexibly, than they are currently doing. 

“This large pool of untapped potential part-time employees could be an attractive source of labour to many employers.”

It also found some people were facing difficulties as a result of the higher state pension age, including those unemployed and searching for work at age 65. 

They want or need to continue working but cannot find a suitable job, and are reliant on a working-age benefit system that is much less generous than the pensioner benefit system. 

The IFS estimated that an additional 5,000 65-year-olds were unemployed and seeking work as a result of the increase in the state pension age. 

It also found 4 per cent of women and 3 per cent of men aged 65 report they are out of work for long-term health reasons (rather than being retired) as a result of the increase in the state pension age, an increase of over 25,000 people.