A study conducted by the Institute for Fiscal Studies (IFS), sponsored by the Joseph Rowntree Foundation, reveals that nearly half of the adults between 50 to 70 who exited the workforce in the years 2020–21, ended up in relative poverty.
This percentage is significantly higher than the poverty rates among those who left the labour force in the years prior to the pandemic, despite the overall drop in poverty during 2020–21.
The study, which is a part of the forthcoming annual IFS report on living standards, poverty, and inequality, also points out that this demographic had to slash their weekly food expenditure by around £60. This is a significantly higher cut compared to those who retired in earlier years.
Additionally, these individuals also demonstrated lower levels of well-being compared to previous cohorts. Nearly half, 49%, did not have access to either private or state pensions, compared to the 43% of those newly inactive in 2019–20.
This research suggests that many older workers who retired during the pandemic’s first year did not do so comfortably. They were likely forced into early retirement due to labour market disruptions and the higher health risks posed by the pandemic, with no pension income to fall back on. This has led to a decline in their living standards and well-being.
However, the adverse effects were confined to those who became inactive during the first year of the pandemic. Older workers who left the workforce in 2021–22 enjoyed similar living standards and levels of well-being as pre-pandemic cohorts, suggesting that they likely retired voluntarily and had comfortable incomes.
Xiaowei Xu, a senior research economist at IFS and an author of the research, commented: “It is often assumed that older people who left the workforce during the pandemic were wealthy individuals retiring in comfort. Our analysis shows that those who left in the first year of the pandemic experienced a sharp rise in poverty, despite overall poverty rates falling that year, and also suffered large falls in well-being.”
JRF chief analyst Peter Matejic said: “A high-participation, high-inclusion labour market is vital to reducing poverty. It would help households to boost their incomes, and make sure people are not excluded from the financial, social and health benefits of good work.”
Andy Briggs, group CEO of Phoenix Group and Government Champion of Older Workers, added: “Financial pressures, particularly with the cost of living, may push some people to return to work, but we know that without good jobs and age-inclusive employers, many people will still face the same barriers to work that made them leave in the first place.”
