Early retirement in England is increasingly the preserve of the wealthy as the less well-off are either forced to carry on working to make ends meet or are forced out of the labour market by ill health, research shows.
The Institute for Fiscal Studies (IFS) thinktank found there had been a marked change in employment patterns for those in their 50s and 60s, with wealth the key factor in determining whether people chose to stop working.
An IFS study conducted with the abrdn Financial Fairness Trust found that in 2002-03, wealth made little difference to whether 55- to 64-year-olds retired early. Back then, 20% in the poorest fifth of that age group had retired early voluntarily, compared with 28% for the wealthiest fifth. However, by 2018-19, only 7% of the poorest fifth were retired against 24% for the wealthiest fifth.
Many of the poorest were out of work for health-related reasons, with 39% of the poorest fifth in 2018-19 not in the labour force but not retired either. Most reported themselves as permanently sick or disabled or – to a lesser extent – looking after family, the IFS said.
The increase in employment in that age group over the period was strongest among those with average levels of wealth. The IFS said the employment rate of the middle fifth in terms of wealth rose from 59% in 2002-03 to 76% by 2018-19. That was considerably higher than the level reached among the poorest fifth (which went from 40% to 46%) or the wealthiest fifth (60% to 65%).
The IFS said the poorest 20% of households in the age group had less than £65,000 in housing and financial wealth, the middle 20% had wealth of £205,000 to £385,000 and the richest 20% had wealth in excess of £650,000.
Jonathan Cribb, an associate director at the 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.”
The IFS said many more people were now working into their late 60s and early 70s than two decades ago, but there was a different pattern of working to that below the state pension age, currently 66.
Among people aged 70-74, the employment rate was 15% for the richest fifth, compared with 11% for the middle fifth and 6% for the poorest fifth. The thinktank said this was consistent with existing research showing those working beyond state pension age often did so because they enjoyed the work or wanted to keep active, rather than out of financial necessity.
