Working over-65s contribute four times pensions 'triple lock' to UK plc

People continuing to work past state pension age contribute more than £60bn to the UK economy each year, equivalent to four times the projected annual cost of implementing the pensions 'triple lock', an analysis has argued.

The study from the think-tank The Centre for Ageing Better concluded that, with workers aged 65 or over now accounting for one in 25 of the UK workforce, it is estimated that those working past state pension age contribute around 2% of the country's total GDP.

This economic output equates to around three times the annual police budget and is significantly larger than the annual increases to the NHS day-to-day spending planned for the rest of the decade, it highlighted.

In fact, those working past state pension age generated around £6.8bn of income tax revenue and employer NICs annually, the centre estimated.

This annual income tax revenue was larger than the total tax paid in the UK by giant multinationals such as Amazon and Tesco.

The analysis reflects the growing number of people working past state pension age, with the 65+ age group currently experiencing the fastest growth in employment, in both rates and numbers, of any age group, the centre said.

The employment rate for this group has more than doubled since 2000 and currently sits at 13.2%. More than 180,000 people in this age group have joined the workforce in the last year alone, bringing the overall number to a record 1.7 million people.

Trends also indicate that workers past state pension age are earning greater income than previously. Analysis of recent labour market statistics by the centre showed that workers aged 65+ earn on average around half (51%) the median weekly pay of workers aged 35-49 - a substantial rise from 40% a decade ago.

As a result of this rising labour market participation, coupled with frozen income tax thresholds, a higher proportion of those aged 65 and above (65%) now pay income tax compared to those aged 16-64 (63%).

Dr Andrea Barry, deputy director for work, retirement and transitions at the Centre for Ageing Better, said: "Our analysis of the post state pension age workforce is further evidence that retirement in this country is changing.

"The traditional retirement cliff-edge, where people moved directly from full-time work to no work, is no longer the case for the majority. Government policy needs to catch up with this fundamental change.

"The government should undertake a holistic review of its approach for people in their 60s so that policy better reflects the needs of this changed reality," Dr Barry added.