People who are neither employed nor unemployed are defined as inactive. There are 20m people in the UK aged 16 and over who are inactive, 9m of whom are aged 16-64 and 11m aged 65 and over.
A key group of people defined as inactive are retirees who are of working age and below state pension age. The definition of working age remains under 65 in the official statistics although the state pension age is currently 66.
The earliest age that most people tend to retire is 50.
Number of inactive adults aged 50-65
There are about 3.6m economically inactive adults aged 50-64 and a further 0.4m aged 65. In total, there are about 4m inactive adults aged 50-65 in the UK.
Benefit claimants and non-benefit claimants
Crucially, slightly more than half of economically inactive adults aged 50-65 do not claim benefits. This means 2.1m economically inactive adults aged 50-65 are not part of the welfare system.
Retired inactive 50-65 year olds
Some 1.2m inactive 50-65 year-olds state they are retired. A fair assumption is that they are not claiming benefits.
Another 0.5m people state they are looking after their home or family, including care for grandchildren and elderly parents. Many might be in households where a partner is working – or retired – and others will be undertaking caring duties without claiming state benefits. They could view themselves as retired.
Financial circumstances
A large number of the 2.1m inactive 50-65 year-olds not claiming benefit will have access to income from workplace pensions.
They range from people using defined benefits pensions payable at age 60, to people using personal pension ‘pots’ from age 50 to tide them over until they get to state pension age, at which point they become eligible for both state pension and means-tested Pension Credit.
The ‘pension freedoms’ that are now in place mean that people can use their pension pot from age 55. There are tax consequences of doing this, but there have been large rises in use of pension freedoms.
Active labour market policies for retirees
The UK has a labour shortage.
A lower supply of labour due to rising economic inactivity since the pandemic increases pressure on pay settlements and may force the Bank of England to respond with higher interest rates to curb inflation.
One group to encourage back into the workforce is the long-term sick claiming benefits. Another is retirees not on state benefits.
An approach to employment support for the over-50s cannot be based only on benefit claimants, although the benefit claimants are likely to be most in need.
Active labour market policies involve communicating consistently that work is the objective, by a range of state and other bodies including charities and financial advisers.
Interventions will also need to take into account the type of employment the retired might wish to take. Part-time rather than full-time jobs might be demanded as well as self-employment to top up existing pension income to allow older adults more control over their working lives.
Skills support for returning to work
Once older people have decided to try to return to work, they may need some updating of their skills. However, a lot of this may involve recognition of existing skills as much as learning new skills.
People over 50 may have qualifications that stopped being awarded decades ago, by awarding bodies that have changed names multiple times or disappeared. They have life and work experience.
Presenting this in applications through online portals that have not been programmed to recognise such knowledge and experience can be both disheartening and ineffective. Equally, HR managers may include person specifications that do not recognise older skills and life experiences.
Some of these return to work needs can come under ‘employment support’ rather than ‘skills training’ - including helping people to manage applications when they haven’t been doing that for a long time, and explaining that job search methods no longer involve getting on a bike to see Situations vacant boards. Older people may need to relearn how to present their skills in CVs, in order to present the best viewing chances by employers.
Tailored skills training
People will also have more conventional skills needs. But these need to be delivered in a fashion that respects the life experience and existing skills that people have.
People who are over 50 are not starting from the same point as young people, so training needs to be presented differently. Older people are more likely to want just enough training to get them where they want to go, which is unlikely to fit into the academic year-based offerings from DfE.
In fact, short courses may be sufficient for both employer and retiree. The level of the learning can be assessed in the same way as long courses for people with less experience. The level of competence should be the same.
Supporting retired disabled people to re-join the workforce
Some of the 2m retired 50-65 year-olds not claiming welfare might be disabled, while many are claiming benefits.
Older people with health problems claiming Universal Credit are eligible for the Work and Health Programme, although this programme is tiny. Outcomes though for older disabled people are above average for disabled people of all ages.
Creating a work and health programme for retired disabled people looking to get back into work might be worth considering.
The rising state pension age
Between 2026 and 2028, the state pension age will rise to 67. A review of the state pension age, which is due to report early in the New Year, is expected to recommend a rise to 68 in 2033 because life expectancy at 65 is rising by about 1 year every 10 years.
This means another cohort of older adults will face the choice of retiring and living off accumulated assets or remaining in the workforce. It makes the ambition of getting retired people back into employment a medium-term as well as short-term challenge.
Paul Bivand is a Labour Market Analyst