The Default Retirement Age ("DRA") allowed employers in the UK to forcibly retire staff over 65 and was abolished in 2011. Now that some three years have passed since then, we wanted to see what, if any, impact this has had. To do this, we analysed data from the ONS showing the number of over 65s in employment.
We have split the data into three distinct time periods: the 1990s (shown blue in the graph), the noughties (red) and the post DRA period (green). Click the graph below to enlarge it to full screen.
Between 1992 and 2000, there were around 400,000-500,000 people aged over 65 in employment. This number fluctuated quite a bit, but never went outside of this range. For practical purposes, it was relatively static.
The trendline through these points proves this. The line is very flat. Its gradient (i.e. the number before the x value) is just 98.3. This shows the expected change in the number of over 65s in employment per month i.e. in any given month, we’d expect there to be around 100 more over 65s in employment. However, as we are referring to total figures in the hundreds of thousands, this shows there was no real growth in the numbers of over 65s in employment in the 1990s.
The noughties (2001-2011)
At the start of the century, things changed. The number of over 65s in employment grew consistently from 2001 onwards.
By early 2003 the figure exceeded 500,000 for the first time. Three years later, it surpassed 600,000 and by 2008 there were over 700,000 people aged 65+ in employment. Just prior to the abolition of the DRA, there were over 800,000 over 65s in employment. This is a marked change from the previous period.
A trendline plotted through these points shows just how consistent the growth was. The gradient of the graph is much higher and, on average, the number of over 65s in employment increased by around 3,500 per month.
The R2 value shows that the growth was very consistent. This is a measure of how a line ‘fits’ the points. As can be seen from the graph, this value is 0.96. This means that the increase during this time period was very predictable and followed a simple linear increase (the trendline explains 96% of what actually happened; a line with a R2 value of 1 would perfectly explain the changes over time).
Post DRA (October 2011 onwards)
The DRA was abolished from 6 April 2011. Transitional provisions were in effect until 1 October 2011. This meant that, provided a notice of retirement had been served prior to 6 April 2011, those who reached 65 prior to 1 October 2011 could be mandatorily retired. For this reason, October 2011 was chosen as the start of this period.
During this period, the number of over 65s in employment increases by over twice as many each month than previously. On average, the number of over 65s in employment increases by around 7,600 per month.
With an R2 value of 0.97, this trendline is an even better fit.
Undoubtedly, the economy is a major driver behind employment rates, and the fact that the economy has improved over the past few years could explain the increase.
Yet when analysing the over 65 figures, the economic crisis of the past few years is completely hidden. During the worst ever financial crisis of modern times, the number of over 65s in employment continued to grow, albeit a bit slower (in the graph this is evident as a bit of white space below the trendline in the red time period during 2007/08).
As that the trendlines fit so well, we can extrapolate to see what the position would be now had the trends of the red time period continued to today. Doing this shows that there are more than 131,000 additional over 65s in employment than we would have expected had the trend before the abolition of the DRA continued.
It is therefore not a great leap to assume that a big reason behind this dramatic change was the abolition of the DRA. The change in growth – from around 3,500 a month to 7,600 a month – suggests that the DRA was used to retire around 4,000 over 65s a month.
If the trend of the period we are currently in (the green period) continues, we can expect 1.2m over 65s in employment by July 2015, and 1.3m by August 2016. Time will tell whether this is a long term trend or simply a medium term one. It may be that the large monthly increases are only temporary whilst people continue in employment until a time of their own choosing, rather than being mandatorily retired.
In the few months before the DRA was abolished, there was a marked fall in the number of over 65s in employment. The number fell by around 50,000. Could this have been employers rushing to make a last ditch use of the DRA before it was gone for good? There is no way of knowing for sure, though it is a curious anomaly in the data which could be explained in this way.
The data containing our analysis (as well as a link to the original source data from the ONS) is available here.