DOWNSIDES OF POSTPONED RETIREMENT: UK evidence of reduced informal care support for parents and greater pressures on the NHS

12 Apr 2021

At a time when governments in ageing societies are raising the retirement age to increase the labour supply of older workers, new research by Ludovico Carrino, Vahé Nafilyan and Mauricio Avendano Pabon suggests that the net gain arising from increased employment may be smaller than anticipated. This is because of a reduction in older workers’ ability to provide intergenerational care support for their parents.

Their study finds that women in the UK who work more hours due to the increase in their state pension age substantially reduce informal caregiving to older parents, who receive less overall care as a consequence. The reduction in the supply of care for older people is expected to lead to higher unmet need, increasing the demand and costs for health services later in life.

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Among women aged 55-65 providing care outside their household, an increase in work-time by 10 hours/week, due to postponement of the state pension age (SPA), leads to a drop in care time by 2.1 hours/week. Moreover, it reduces by 50% and 36% the probability of providing intensive care (20+ hours/week) or meaningful care (5+ hours/week). For someone working 30 h/week (the population average), there is a reduction in caregiving of 330 hours a year, valued at around £5,600 (standard rate of £17/hour).

Specific groups are more affected by longer working. First, the above effects are twofold among women engaged in jobs characterised by high physical or psychosocial demand. Second, among women with ‘sandwich’ care responsibilities for both grandchildren and parents, the probability of providing any amount of care drops by 30% on average.

Parents who receive less help from their daughter do not receive more help from other family members or formal services as a counterbalance. Therefore, total support for older parents shrinks when their daughters work longer due to postponed SPA.

Policy relevance

Findings from this study highlight the unanticipated impact of pension policies on overall welfare. Informal care represents the largest source of long-term care in OECD countries, with large economic value (over £132 billion in the UK alone in 2015).

Over two million carers in the UK (over 30% of all carers) are aged between 50 and 64 years old, a key age group affected by pension reform. The reduction in the supply of care for older people is expected to lead to higher unmet need, increasing the demand and costs for health services later in life.

The study highlights the fact that policies should not be considered in institutional silos, but their overall welfare impact should be considered. Policies that support vulnerable older people and their caregivers may be warranted.

For example, expanding caregiver’s allowances coverage to women who face an increasing SPA might increase their ability to care for older relatives. Access to formal care services might be reformed, for example, by relaxing eligibility rules for older people whose primary caregiver was subject to an increase in their State Pension age.

Finally, workplace interventions could be implemented, by giving incentives to employers to offer flexible work arrangements for women who have caring responsibilities.

Methods and data

The study followed 7,102 women aged 55 to 65 between 2009 and 2018, using the Understanding Society survey. By comparing information on individual’s birth and interview date, the researchers classified respondents based on whether they were eligible for the state pension at the time of interview. Using an instrumental variable approach, they compared the working time and caregiving decisions of women who were not eligible to receive their state pension because of legislation changes, to that of women of a similar age and characteristics, who were unaffected by the reform by virtue of their birth date.

Separately, they followed a sample of 1,617 parents aged 70 or older between 2006 and 2017, from the English Longitudinal Study of Ageing (ELSA). By exploiting information on children’s birth date, they classified respondents based on whether their eldest daughter was eligible for the state pension at the time of interview. Using a difference in differences approach, they compared the amount of care received by parents with daughters of similar age and characteristics, but different pension eligibility due to the reform.

Should I care or should I work? The impact of working in older age on intergenerational support Ludovico Carrino, Vahé Nafilyan, Mauricio Avendano Pabon

Ludovico Carrino

Research Fellow | King's College London | ludovico.carrino@kcl.ac.uk