Risks of old-age poverty for those retiring early are ‘strongly linked to occupation’

A study for the Joseph Rowntree Foundation suggests that men who have spent most of their working lives in occupations such as clerical or sales, skilled crafts, and personal or protective services (ranging from police constables and paramedics to waiters) may be especially vulnerable if they stop work early. By contrast, low rates of participation in the labour market between 50 and 60 appear to make little difference to the chances of being poor in old age for women or also for men who worked in managerial, professional or manual occupations.

The researchers from the Institute for Social and Economic Research at the University of Essex analysed data gathered throughout the 1990s as part of the British Household Panel Survey. This showed a rise in employment rates among women aged 50–54, while rates among men stabilised after falling steeply during the 1980s. However, the income gap between older people retiring on occupational and personal pensions and those who had to rely on state pensions and benefits remained substantial.

The study found that the risks of having a low income after 60 (defined as being among the poorest third of the 60+ population) were strongly related to occupational group and continuity of employment between 20 and 60. Not surprisingly, women who had worked in managerial, professional, and clerical occupations were less likely to be poor, as were men from professional and clerical backgrounds.

However, further analysis revealed that the advantage enjoyed by men in some white-collar occupations could be substantially reduced by an early exit from the labour market. For example, the probability that men who had worked for 30 years or more in personal and protective services would have a low income when 60+ was only 9 per cent if they worked throughout their 50s. But for those who worked for fewer than five years during their 50s, the probability was as high as 67 per cent.

The authors argue that reduced opportunities to amass savings and pension entitlement were unlikely to have been the only reason that stopping work in their 50s led to a low income when aged 60+. Many of the men affected may also have been low earners within their occupational group and, as such, more likely to lose their jobs.

They also suggest that the lack of association between women’s poverty in old age and early labour market exit in their 50s was because intermittent labour attachment was a characteristic feature of their whole working life (e.g. breaks from paid work for child care and other reasons), not only in their 50s. By contrast, work attachment for most men only became intermittent in their 50s. What was particularly relevant for the chances that a woman over 60 would be relatively poor was her household type and marital status. Women without a partner, especially those who were divorced, had a substantially higher risk of low incomes than those who were married or cohabiting.

Dr. Elena Bardasi, co-author of the report, said: “These results suggest that, for many women, having a partner with a good working history still makes more difference to their income after retirement than their own working histories. The findings also underline the importance of measures to enable men and women to make better provision for their old age and accumulate assets during their working lives in the form of savings or pension rights. While women’s participation in the labour market over their whole working lives will affect the adequacy of their retirement incomes, our study shows that policy measures to tackle pensioner poverty that focus on early withdrawal from the labour market will make the greatest difference to men.”