Research indicates that early retirement in England is increasingly a privilege reserved for the wealthy, as economic disparities force less affluent individuals to work longer or exit the labour market due to health issues.
The Institute for Fiscal Studies (IFS) has uncovered a significant shift in retirement patterns among people in their 50s and 60s, with financial wealth emerging as the decisive factor influencing their retirement decisions.
In a study conducted in collaboration with the abrdn Financial Fairness Trust, the IFS noted that in 2002-03, one’s wealth had little impact on whether individuals aged 55 to 64 retired early. At that time, 20% of the least affluent fifth of this age group voluntarily retired, compared to 28% of the wealthiest fifth. However, by 2018-19, the retirement landscape had transformed, with only 7% of the least affluent fifth choosing early retirement, in stark contrast to the wealthiest fifth at 24%.
A substantial portion of the less affluent population was no longer part of the workforce due to health-related reasons. In 2018-19, 39% of the poorest fifth were neither employed nor retired, citing chronic illness or disability as the primary reason, and to a lesser extent, caregiving responsibilities.
The increase in employment among individuals in their 50s and 60s during this period was most significant among those with moderate wealth. The middle fifth, in terms of wealth, experienced an employment rate surge from 59% in 2002-03 to 76% by 2018-19. This contrasted with the least affluent fifth, where employment only increased from 40% to 46%, and the wealthiest fifth, where it rose from 60% to 65%.
The IFS identified the poorest 20% of households in this age group as having less than £65,000 in housing and financial wealth, while the middle 20% possessed wealth ranging from £205,000 to £385,000, and the richest 20% had wealth exceeding £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.”
What’s more, the study revealed that more individuals now choose to work into their late 60s and early 70s compared to two decades ago. However, there’s a distinction in the working patterns above the state pension age, which currently stands at 66. Among individuals aged 70-74, the employment rate stood at 15% for the richest fifth, 11% for the middle fifth, and 6% for the poorest fifth.
The IFS suggests that this aligns with existing research showing that those working beyond the state pension age often do so out of personal preference, enjoying the work or seeking to stay active rather than out of financial necessity.