Baby boomers with private pensions and housing wealth more likely to retire early

A third fewer baby boomers were in the labour market at age 62 than at age 55, with retirement being the most common reason for leaving the workforce, according to new research from the UCL Centre for Longitudinal Studies.

The findings show that among this generation of British adults, born in 1958, those who had paid off their mortgage and had a private pension were more likely than their peers to have left the workforce by their early 60s.

Lead author, Dr Vanessa Moulton (UCL Centre for Longitudinal Studies) said: “Our new study shows that those who had access to private pensions and housing assets were in the best position to retire at this relatively early stage of later life. Those without these resources may have to work up until State Pension Age – age 66 for this cohort – and perhaps beyond, assuming they remain in reasonably good health and do not have long-term caring responsibilities.”

What the researchers looked at

The study’s authors analysed data from more than 17,000 people born across England, Scotland and Wales during one week in 1958, who are taking part in the 1958 National Child Development Study. They examined information about people’s employment status, finances, health and family situation at ages 55, 62 and 63, to understand how individuals’ circumstances impacted their working lives as they approached State Pension Age.

The study compared those who were employed or unemployed but seeking work, and therefore active in the labour market, at ages 55 and 62, with those who were economically active in their mid-50s but who had left the labour market at age 62.

At age 55, four fifths (80.3%) of baby boomers were employed or looking for work. By age 62, a third fewer were in the labour market, resulting in just over half of this generation (54.8%) remaining economically active. More than a quarter (28.4%) of those who had left the workforce in their mid-50s and early 60s were in retirement. Although more men than women (81.9% v 71.6%) were employed in their mid-50s, a similar proportion had retired by age 62.

Who retired early?

A higher proportion of people who had left the workforce at age 62 than remained active owned their home outright at age 55 (29.4% v 18.2% for men, and 35.8% v 25.4% for women). Additionally, a higher proportion of men who had left the workforce by age 62 than remained in the labour market had an employer’s pension at age 55 (50.2% v 31%).

Women still in the workforce at 62 were more likely not to have a partner than women who had exited the labour market (28.4% v 15.4%). While those who had left the labour market by age 62 were more likely to have partners who had retired by age 55.

Over a third (36%) of men who left the labour market by age 62 reported having a long-term illness at age 55, compared to a quarter (27.6%) of men who stayed in the workforce.

In their mid-50s and early 60s, women were over three times more likely than men to not be in the labour market because of caring responsibilities. Also, both men and women who had exited the labour market by age 62 were more likely to have no children living at home than those still in the workforce (57.9% v 50%).

Leaving the workforce during Covid-19

In a separate analysis, the researchers aimed to investigate the factors associated with leaving the labour market at age 63 in the first year of the Covid-19 outbreak. They found that the proportion still in the labour market in the first year of the pandemic had dropped very slightly (54.8% v 50.7%). Importantly, the study found that people’s labour market transitions were influenced by similar factors before the pandemic and in its first year, suggesting that this was a continuation of an ongoing trend, rather than solely a ‘pandemic-effect.’

Dr Moulton added: “This study confirms known trends of older adults leaving the workforce in large numbers pre-State Pension Age, and calls into question the effectiveness of initiatives to extend working lives. The increase in the State Pension Age for women in this cohort by six years, from age 60 to 66 will have removed some of the financial resources available to them. This may have contributed to why the most financially vulnerable women, particularly those who are single and with lower incomes, are more likely to remain in the labour market.”

Forthcoming new data about the 1958 generation up to age 65 will provide insights into the lives of this cohort in the latter years of the pandemic and beyond.

Further information

Economic inactivity before reaching State Pension Age: Life course evidence from the 1958 National Child Development Study by Vanessa Moulton, Alissa Goodman, Matt Brown, George B. Ploubidis is available to read on the CLS website.