Smith, S.L.; (2008) Understanding retirement in the UK: an empirical analysis. Doctoral thesis , University of London.

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Abstract

Like most OECD countries, the UK has experienced a long-term trend towards earlier Etirement, beginning in the 1970s, a trend that has only recently been reversed. The aim of this thesis is to shed light on these trends. Chapters 1-3 consider the nature of retirement. Economic models typically assume that retirement is voluntary, discrete and irreversible, and synonymous with drawing a pension, and this has been the dominant pattern for men in the UK. But there is a large minority, typically those with low wealth, for whom the path to retirement is through unemployment or long-term sickness and for whom unemployment and disability benefits provide alternative early retirement vehicles. Analysis of retirement expectations show that shocks to health and to marital status cause retirement plans and outcomes to diverge. The distinction between "voluntary" and "involuntary" retirements is important in understanding the well-documented fall in spending that occurs after retirement (the "retirement- consumption puzzle"). Spending falls significantly only when retirement is involuntary, a finding that is consistent with a negative wealth shock arising from involuntary early retirement lying behind the puzzle. Chapters 4-6 explore the responsiveness of the labour supply of older workers to incentives in state and private pensions. Pens ion wealth and accrual are shown to have significant effects on retirement, at least for the state pension and for defined benefit occupational pensions. However, early evidence suggests that wealth in defined contribution schemes does not have the expected positive effect on retirement, a finding that is consistent with their greater flexibility. The labour supply of older workers is also shown to be affected by earnings tests the removal of such a test in the UK is estimated to increase average weekly hours by three - four hours for men and two hours for women.

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