New research conducted by the University of Bath reveals a growing disconnect between rising State Pension ages and the retirement expectations of younger British workers. While many older individuals are delaying their retirement in response to pension reforms, younger cohorts—especially women—appear underprepared for the realities of retiring later. The study warns that many of these individuals continue to harbour expectations of early retirement, despite policy changes that have significantly shifted the landscape. Researchers highlight a concerning gap between retirement aspirations and the financial preparedness needed to make them feasible.
Published in the Journal of Pension Economics and Finance, the study uses data from the UK Household Longitudinal Study. This nationally representative survey tracks individual and household behaviours over time. It examines the impact of the 2011 and 2014 Pension Acts, which accelerated the equalisation of the State Pension age for men and women and raised the eligibility threshold to 66 or 67, depending on one’s date of birth. The findings indicate that a one-year increase in the State Pension age results in an 8.2 percentage point drop in the likelihood of men retiring, and a 6.4 percentage point drop for women.
The research indicates a significant generational divide in how people respond to these changes. Baby boomers—those approaching retirement—are more likely to adjust their retirement plans and work longer. In contrast, members of Generation X, particularly women born in the 1960s and early 1970s, are not aligning their expectations with the new realities. Despite having access to occupational pensions, many in this group are revising their anticipated retirement age downward, assuming they can exit the workforce earlier than current policy allows.
This optimism may prove costly. Many younger workers, researchers note, plan to rely on a mix of occupational pensions and part-time work during retirement to fill the gap left by delayed access to the State Pension. However, these assumptions could lead to shortfalls if expectations about pension income or future job opportunities prove unfounded. The study highlights a significant gap between what workers expect and what transpires: older individuals tend to revise retirement plans only when they are close to retiring, at which point their options for boosting savings or staying in the labour market may be limited.
Dr Ricky Kanabar, lead author and senior lecturer in the Department of Social and Policy Sciences at the University of Bath, stresses the importance of aligning expectations with policy realities. “Ensuring individuals adequately prepare for retirement is of paramount importance,” he explains, “especially as people are living longer and increasingly bearing the responsibility of funding their own later life. There is a real risk that those who assume an early retirement will find themselves having to make abrupt and potentially disruptive adjustments in their fifties or sixties.”
To address this misalignment, the research team urges policymakers to improve communication about the implications of rising State Pension ages, especially among younger women with occupational pensions. Initiatives like the government’s Midlife MOT and the forthcoming Pensions Dashboard could help close the information gap. Dr Kanabar concludes that proactive engagement is essential to strengthen financial resilience in later life: “Overoptimism and misplaced reliance on workplace pensions may lead to hardship or forced labour market changes. Now is the time for policymakers to engage more meaningfully with these vulnerable groups before it’s too late.”
More information: Ricky Kanabar et al, State pension eligibility age and retirement behaviour: evidence from the United Kingdom household longitudinal study, Journal of Pension Economics and Finance. DOI: 10.1017/S1474747225000095
Journal information: Journal of Pension Economics and Finance Provided by University of Bath