# Chapter 4: The labour market and retirement (2012 edition)

Released: 16 February 2012

## Also in this release

Transcript – Pensions Trends, Chapter 4,  Ageing, life expectancy and retirement, 2012

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This is a transcript of the video podcast which can be viewed at http://www.youtube.com/watch?v= dswpRYbB-xs

Slide 1

This is a podcast on ageing, life expectancy and retirement.

For a transcript email info@ons.gov.uk .

Slide 2: The ageing population

To start this podcast we will look at how the UK population is ageing using a population pyramid, firstly showing the number of people of each year of age in 2010. What look like eyebrows around the ages of 61 to 63 are the post-war baby boomers.

If we bring up this dotted line we can see that the percentage of the population aged 65 and over was 17 per cent, while using this line we can see that 2 per cent are aged 85 and over.

If we now draw a line outlining the 2010 population and then move through the years we can see the population ageing. By 2051 the population pyramid at most ages is fatter - showing an increased population within the UK. Also there are more people in the population in the older age groups: in 2051,       24 per cent of the population is projected to be aged 65 and over and 7 per cent is projected to be aged 85 and over.

Slide 3: Life expectancy and healthy life expectancy

Population ageing is mainly due to increasing life expectancy combined with relatively low fertility rate. It is happening all over the world, not just in the UK.

This chart looks at life expectancy for people aged 65 based on data in 2008. It shows that men aged 65 had remaining life expectancy of 17.6 years, while women aged 65 had 20.2 years.

A related question is how long people have to enjoy their remaining years in a relatively good standard of health. In terms of healthy life expectancy, men at age 65 in 2008 could expect to live for a further 9.9 years in good or very good health, while women could expect a further 11.5 years.

Slide 4: Life expectancy at State Pension Age

Although age 65 is often used as a reference point, some people retire before this and others retire later. An alternative starting point is the age at which people can claim their state pension. If we bring up this chart we can look at cohort life expectancy from the perspective of men and women of State Pension Age. In the first three decades shown, when State Pension Age was 65 for men and 60 for women, life expectancy at these ages rose rapidly for both sexes.

However, State Pension Age is now changing. Parliament has passed legislation increasing State Pension Age, first for women – to 65 by November 2018 – and then, over the next three decades, for both men and women. Therefore, over the next decade women will see a decline in their life expectancy at State Pension Age. Between 2021 and 2051, life expectancy at SPA is expected to rise gradually for both sexes.

Slide 5: The old age dependency ratio

While longer life expectancy is a favourable trend, it has implications for things like provision of pensions and social care. The ‘old age dependency ratio’ looks at the changing relationship between pensioners and working people by measuring the number of people of State Pension Age or over for every 1,000 people  of working age (16 to State Pension Age). This ratio was steady at around 300 from the mid-1970s to 2006.

Then, as the post war baby boomers began to reach State Pension Age, the dependency ratio began to rise. In the absence of any increases to State Pension Age, it would reach 492 by 2051. This is equivalent to around two people of working age to support every pensioner.

But the increases in State Pension Age have the effect of increasing the number of people of working age and reducing the number of pensioners. As a result, the old age dependency ratio is projected to remain lower. It will be 342 in 2051, equivalent to almost 3 people aged 16 to State Pension Age to support every pensioner.

It should be noted that these projections are based on this legislation, and do not take into account possible changes that have not yet become law.

Slide 6: When people stop working

Although the old age dependency ratio is a helpful measure, it assumes that everyone retires at State Pension Age. However, not everyone retires at State Pension Age.

Using this chart we can look at the percentage of people who left the labour market in April to June 2011. Firstly, looking at men we can see a peak around State Pension Age. If we lighten the bars and look at women we also see a peak at around State Pension Age. However, many people retire early and others go on working beyond State Pension Age.

Slide 7: Average age of retirement

ONS produces a measure of the ‘average age of leaving the labour market’, which is a proxy for average age of retirement. This slide shows that the average age has risen in recent years: for men from 63.8 years in 2004 to 64.6 years in 2010; for women from 61.2 to 62.3 years. This indicates that people are working longer, either because they want to or due to necessity.

The information in this podcast comes from Pension Trends Chapters 2, 3 and 4 which are available on our website.

For any queries regarding this podcast please e-mail pensionsanalysis@ons.gov.uk

The animated video with commentary explains the latest statistics published in three Pension Trends chapters on 16 February 2012. It covers:

• how the UK population is ageing

• life expectancy and healthy life expectancy in retirement

• the 'old age dependency ratio'

• changes in the age when people stop working and retire

It is based on Pension Trends Chapter 2, Chapter 3 and Chapter 4.

Source: Office for National Statistics

## Background notes

1. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Content from the Office for National Statistics.