It has also changed the behaviour of some of the husbands of the affected women – possibly because they are delaying their own retirement so they can both retire together or perhaps to cover their wives’ lost pension income with additional earnings. These findings are from new research recently undertaken by researchers at the Institute for Fiscal Studies.
Impacting on the labour market, employment rates among 60 year old women have increased by 7.3% and in April 2012 there were 27,000 more women in work than there would otherwise have been. Employment rates among their husbands also increased, by 4.2%, with 8,300 more men in work than there would otherwise have been. More women aged 60 were unemployed, with some 5,000 more women aged 60 not in work but looking for work.
The report also suggests that future increases in the state pension age will lead to a substantial increase in employment and will strengthen the public finances, estimating that effectively the UK’s public finances have been currently strengthened by around £2.1 billion.
The effects the study found are especially large given that most women (and men) do not retire at their state pension age. The employment rate for 60 year old women rose from 41.5% to 51.4% between 2010 and 2012. These effects have also been seen in the context of a weak economy which might have made staying in or finding work more difficult.
Women may be using the state pension age as an “anchor” in making their retirement decisions. In addition, there is evidence that some women did not realise quickly enough that their state pension age was no longer 60 and so did not take action, for example to increase saving and offset the effect.
Taken together, there were 35,000 more older men and women in work as a direct result of the increase in the female state pension age from age 60 to 61, which occurred between April 2010 and April 2012. Despite the weak performance of the UK economy over these two years, many have been able to limit the loss of state pension income through increased earnings.
The initial evidence is that rising pension ages can have significant positive effects on employment. However, what we have yet to understand more fully is what might the negative effects be within the wider and younger labour market.
