The state pension age (SPA) – the earliest age at which someone in the UK can claim a state pension – has been rising in recent years. Between April 2010 and November 2018, the SPA for women has gradually increased from 60 to 65. In this chapter, we examine how the circumstances of women in their early 60s – in particular, their employment, incomes, activities, health and well-being – have been affected by this increase.

The increase in the SPA has led to a modest increase in employment among women at older ages, but many still retire at age 60. It is estimated that women who are below rather than above the SPA at ages 60–63 are 10 percentage points (ppt) more likely to be in paid work. This represents around a 25% increase in the proportion of women in paid work at these ages.

Key findings

• The estimated association between the SPA and employment varies according to other characteristics of individuals, as follows.

o Being below the SPA is only associated with an increase in employment when individuals correctly knew their SPA at around age 58. This could be explained by the fact that individuals who are ‘surprised’ by their SPA are unwilling or unable to deviate from their retirement plans. Alternatively (or additionally) it may be that individuals who make their retirement plans irrespective of their SPA do not bother to inform themselves of what their SPA is.

o The positive association between being below the SPA and being employed is stronger when individuals were in employment at age 58. This could be because those in work at age 58 are more able to find or stay in work until later ages.

o The positive association between being below the SPA and being employed is also stronger when individuals have private pensions (all else equal) – whether defined benefit or defined contribution – than when they do not, and when individuals have higher levels of financial wealth or are owner occupiers compared with when they are not.

• Together, these findings provide relatively little support for the idea that the effect of the SPA on employment is driven by credit constraints (i.e. a lack of financial resources meaning that individuals have to work in the absence of state pension income), and more support for the idea that the SPA affects employment by providing some social signal about the ‘appropriate’ age to retire.

• Overall, being below the SPA at ages 60–63 is found to lead to a decrease in average equivalised total household income of £36 per week. This is caused by the decline in state pension income being only partly offset by an increase (on average) in other benefit income and income from paid work.

• There is little evidence that being below, rather than above, the SPA at ages 60–63 has an effect on many other aspects of time use, such as having a hobby, providing informal care, hours of television watched, or looking after grandchildren. However, there is a negative effect of being below the SPA on women’s cultural activities, and on the number of times they see friends each month. This could be driven by women having less time – due to the increased probability of being in employment – or by women having less income, or both.

• Being below rather than above the SPA at ages 60–63 appears to have little association with individuals’ loneliness, social isolation, depression, cognitive function or self-reported health. However, being below the SPA is associated with a 7 ppt reduction in the prevalence of moderate mobility problems. This may be indicative that staying in paid work is beneficial in terms of maintaining mobility.