Yahoo Finance State pension age changes keep thousands more in paid work
The latest increase in the state pension age has resulted in record high employments levels among 65-year olds, research has found.
Combined, 65-year-olds are working an additional 1.8 million hours per week due to the latest increase in the state pension age from 65 to 66, according to the Institute for Fiscal Studies (IFS). Around 55,000 more 65-year-olds were in paid work in 2021, the research shows.
The gradual rise in the state pension age took place gradually between 2018 and 2020.
The reform led to an additional 7% of men and 9% of women staying in paid work at age 65, taking the male employment rate at age 65 to 42% and the female rate to 31%.
Both are the highest seen since at least the mid 1970s and, in the case of women, “very likely” to be the highest rate ever in the UK.
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But effects of the rise were also found to be unequal.
In the most deprived areas, the bottom 20%, the employment rate for women aged 65 rose by 13 percentage points and by 10 percentage points for men.
In the most prosperous areas, female and male employment rates at age 65 rose only by four and five percentage points respectively.
This reflects the greater need for income at older ages among those living in poorer areas, the IFS 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,” according to Jonathan Cribb, an associate director at IFS and an author of the report.
“But of the 55,000 extra 65-year-olds who are 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.
"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.”
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The research also estimated that an additional 5,000 65-year-olds are unemployed and seeking work as a direct result of the increase in the state pension age from 65 to 66.
In addition, around 25,000 people are out of work for long-term health reasons, rather than being retired, as a result of the state pension age rising from 65 to 66.
Emily Andrews, deputy director for evidence at the Centre for Ageing Better, said: “People who are not in work are in a much worse position. For the 5,000 65-year-olds who are now unemployed — or the 25,000 who cannot work due to their health — the policy means up to an extra year without the financial benefits of a salary or £9,000 in state pension.
“Indeed, the research shows that most 65-year-olds — 640,000 of them — are making no changes to their working patterns. For them, the policy change simply makes them financially worse off."
The state pension age is set to go up to 67 between 2026 and 2028 and then to 68 between 2044 and 2046 under current legislation.
