Archive:Labour force survey statistics - transition from work to retirement
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Results of the EU Labour force survey (LFS) ad hoc module on the transition from work to retirement
- Data from Month July 2014. Most recent data: Further Eurostat information, Main tables and Database.
This article presents selected results from the EU Labour force survey (LFS) and its 2012 ad hoc module on the transition from work to retirement for the European Union (EU) and all its Member States, as well as for three EFTA countries. The data explain the transition from work to retirement, looking at types of pensions, the age at which people start receiving a pension, early retirement, persons who continue working after starting to receive a pension and the reasons for this, etc.
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Main statistical findings
- The transition from work to retirement takes place mostly between the ages of 50 and 69 and affects around 80 % of the population. The remaining 20 % do not go through this transition, or not in the same way, either because they were not employed in the first place and/or because they do not consider themselves ‘retired’.
- In 2012, the employment rate for persons aged 50-69 was 48.8 % in the EU-28, lower than the rate for workers aged 25-49. Part-time work in this age segment increased, however, (to 21.8 % of the employed population) as older workers prepare to retire. From changes in the employment rates of older workers, it seems that men and women retire from employment at the same pace in most of the countries analysed, although there are differences between countries.
- In 2012, 35.1 % of persons aged 50-69 in the EU-28 received a pension. Of these, 87.4 % received an old-age pension, i.e. a pension resulting from earning entitlements during working life. Other, less common types of pensions also exist.
- Being retired (the self-reported status) and receiving an old-age pension are not the same thing, but in both cases the data used provide a consistent picture. Starting to receive an old-age pension is the main incentive for employed persons to stop working and consider themselves retired.
- However, 15.9 % of EU-28 old-age pensioners continue working. Of these, 62.8 % continue working mainly for financial reasons, while 37.2 % do so mainly for non-financial reasons, e.g. job satisfaction.
- Of those receiving an old-age pension, 43.1 % used an early retirement scheme. They retired an average of 1.9 years earlier than the normal retirement age.
All the data used in this article are based on the EU LFS. Data for the year 2012 are used because in that year the EU LFS had an additional set of variables, the ‘ad hoc module’, about retirement and pensions. (For more information on the LFS and the ad hoc module, please see the end of this article.)
Transition from work to retirement
Retiring is the process by which people leave employment for age-related reasons or other reasons. The process is quite complex: it does not happen at the same age for everybody, nor does it happen under the same circumstances (for example, it may or may not be voluntary, etc.). For many people, it does not happen at all. This article looks at some of these aspects.
The proportion of the population in employment decreases considerably between the ages of 55 and 64 (see figure 1, and the International Labour Organisation (ILO)’s definition of employment at the end of this article). To provide a more comprehensive picture, this article will extend the population studied to cover persons aged 50 to 69. The proportion of employed persons shrinks between the ages of 50 and 69, from 75 % to 7 %. This decrease is largely, but not fully, matched by an increased proportion of retired persons. (The concept of ‘retirement’ used here is self-perceived retirement status. EU LFS respondents choose from among a list of mutually exclusive categories including employed, unemployed, retired, fulfilling domestic tasks, permanently disabled, student, etc.)
While most persons aged 50-69 go through this transition from employment to retirement, about 20 % of the population do not (see top coloured part of figure 1). They fall into a range of categories. Most of them are women fulfilling domestic tasks, persons who are permanently unable to work because of a disability, unemployed persons and persons who are outside the labour force for other reasons e.g. they don’t need an employment income to make a living. This group does not change status with the same intensity and at the same age as those passing from employment to retirement. The group does change with age, however. In particular, it gets smaller when persons stop identifying themselves (and therefore responding to the EU LFS) with their previous situation and start seeing themselves as retired. National cultural factors determine when people’s attitude changes in this respect. In some countries, persons in this group consistently change their attitude when they reach a particular age (typically 65), as in France or Hungary, whereas in other countries they never report they are retired, like in Italy or Spain.
The transition out of employment, as figure 1 shows, takes place at different ages in each country. This can be seen in the employment rates for persons aged 50-69 (see table 1). For comparison purposes, table 1 also shows the employment rates for persons aged 25-49. Of persons aged 50-69 in the EU-28, 48.8 % were employed in 2012. This rate has steadily increased during the last decade in spite of the economic crisis. Some Member States have employment rates that are much higher than the average, particularly Sweden (62.6 %), Estonia (59.3 %) and Germany (58.2 %). Other European countries have even higher employment rates: Iceland (76.0 %), Switzerland (64.7 %) and Norway (64.6 %). Malta (34.9 %), Greece (36.7 %), Croatia (38.3 %) and Hungary (39.9 %) have the lowest employment rate for 50-69 year olds. The employment rate for persons aged 50-69 is lower than for persons aged 25-49 in every country, with a gap of 28.6 percentage points (pp) in the EU-28 in 2012. This gap ranges between 43.6 pp in Slovenia and 7.7 pp in Iceland.
The employment rates for women are lower than those for men in the same age group. In the EU-28, 42.6 % of women aged 50-69 were employed, compared to 55.5 % of men, i.e. a gender gap of 12.9 pp. This gender gap is largest in Malta (36.1 pp), Greece (21.6 pp) and Cyprus (21.1 pp) and smallest in Finland (0.1 pp), Estonia (0.9 pp) and Latvia (2.9 pp). Within each country, the gender gap is generally similar for persons aged 50-69 compared to that for those aged 25-49, except in a few countries. Broadly speaking, this indicates that the employment gender gap does not change as persons get older and make the transition to retirement.
Many people work part-time as an interim step before retirement. The proportion of employed persons aged 50-69 and working part-time in the EU-28 in 2012 was 21.8 %, compared to 17.0 % for persons aged 25-49. This increase in part-time work affects both men and women. The proportion of men working part-time increases from 6.1 % for those aged 25-49, to 10.9 % for those aged 50-69. The proportion of women increases from 29.9 % to 35.1 %. The increase in percentage points is greater for women. However, it is greater for men in relative terms, since they start from a lower baseline level of part-time employment between 25 and 49. Measured in this way, the increase in part-time work between those aged 25-49 and those aged 50-69 is 79 % for men, compared to 17 % for women.
There are significant country differences here too. In Portugal, the proportion of part-time workers increases by 12.2 pp, from 8.1 % of those aged 24-49 to 20.3 % of those aged 50-69. Belgium shows a 10.1 pp increase in part-time work and the United Kingdom a 9.4 pp increase. In contrast, the proportion of part-time work decreases in Italy (by 3.8 pp), from 17.5 % to 13.6 %. Spain and Greece are the only other countries in which the proportion decreases.
In some countries, the level of increase in part-time work is very different for men and women. For instance, in Finland, it is mostly men who change to part-time work as they get older, from 4.7 % of men aged 25-49 to 13.9 % of men aged 50-69. In Ireland, it is mostly women, from 29.7 % of women aged 25-49 to 44.2 % of women aged 50-69.
Pensions
When people retire, they frequently start receiving a pension. This means that one can measure retirement by analysing the persons receiving a pension. This way of measuring retirement, different from the self-perceived status used in figure 1, has the advantage of being more objective. This aspect of pensions was studied in the 2012 LFS using a special set of additional variables included in the 2012 ad hoc module.
Different types of pensions exist, not all of them related to retirement, so it is important to distinguish between them. The 2012 LFS ad hoc module differentiates between old-age pensions and other types of pensions (disability pensions, survivors’ pensions and early retirement benefits). Only old-age pensions are related to retirement from employment (see definitions at the end of the article). Persons can receive several pensions simultaneously, including several types of pension.
Of persons aged 50-69 in the EU-28, 35.1 % received a pension in 2012 (see figure 2). This figure does not include all sources of income and social security cover for older people, as it does not include benefits other than pensions (such as unemployment benefits, medical care allowances, care allowances for disability or old age, benefits during temporary incapacity to work due to sickness or injury, family allowances, long-term savings and life insurance contracts not specifically for pension purposes) or pensions received by people outside the target group.[1]. Because of the relative national importance of these sources of income, the differences between countries shown in figure 2 must be regarded with caution.
Old-age pensions are the most frequent of the types of pension shown in figure 2, with 27.4 % of persons aged 50-69 in the EU-28 exclusively receiving old-age pensions, while 3.3 % combine an old-age pension with another type of pension. In countries such as Greece and the United Kingdom, most pensioners only receive an old-age pension, while in countries such as Germany and Slovakia more persons also receive another type of pension.
The following analysis considers only old-age pensions, because these are pension entitlements built up during a working life, intended to maintain the recipient’s income after he or she has retired.
The proportion of the population receiving an old-age pension increases with age, in line with the decrease in the employed population (see figure 3). Figure 3 provides a picture consistent with figure 1, but there are some notable differences. First, there is an overlap between employment status and receiving an old-age pension (the group labelled ‘receives pension and employed’). This overlap did not exist with the self-perceived retirement measurement approach taken in figure 1. This means there is a group of persons who continue working after they start receiving their old-age pension. They included 15.9 % of old-age pensioners in the EU-28 in 2012. The size of this group and reasons for this occurring vary depending on the country; these are analysed in the next section of this article.
Secondly, the dividing line between the groups labelled ‘receives pension, not employed’ and ‘not employed, no pension’ is measured more objectively. This is because it is based on the receipt or non-receipt of an old-age pension. The approach used in figure 1 relied instead on respondents’ subjective assessment of whether they are retired, disabled, fulfilling domestic tasks, etc. This is not straightforward for people who have been out of employment for several years and who have reached the age at which they are supposed to ‘retire’. Because of this, movement between these groups, particularly between the ages of 60 and 65, is not the same as in figure 1.
Figures 1 and 3 both confirm that starting to receive an old-age pension is the main incentive for employed persons to stop working and start considering themselves retired.
The age at which people start to receive their old-age pension varies among countries. The EU-28 average age is 59. The span of national averages ranges from 57 to 65 (see map 1; note that it shows the age at which respondents first started receiving an old-age pension, whereas figure 3 shows their current age). There is no clear geographical pattern, but people in south-eastern countries tend to be younger when they first receive a pension. Map 1 and table 1 correlate with each other, as countries with a lower average age for starting to receive an old-age pension tend to be those with lower employment rates for people aged 50-69.
Pensions and work
As figure 3 shows, a number of persons continue working after they start receiving a pension. On average in the EU-28, 15.9 % of persons aged 50-69 who received an old-age pension in 2012 also worked, even if just for a few hours a week (see ILO employment definition at the end of the article).
This proportion varies a lot from one country to another. The highest values are reported in Norway (38.7 %), Iceland (37.2 %) and Sweden (34.9 %). These are also among the countries with the highest employment rates for persons aged 50-69 (see table 1). The lowest proportions are reported in Greece (1.9 %), Spain (2.1 %) and Belgium (7.0 %), countries which also have low employment rates for persons aged 50-69. More people receive an old-age pension and continue working in northern Europe than in the south, though there are exceptions, such as Portugal and Romania.
People continue working after receiving a pension for financial reasons and non-financial reasons. Financial reasons include establishing or increasing future retirement pension entitlements, providing sufficient personal or household income, or a combination of the two. Non-financial reasons include job satisfaction.
On average, in the EU-28, 62.8 % of persons receiving an old-age pension who continue working do so mainly for financial reasons, while 37.2 % do so for non-financial reasons. In the first group, 43.8 % work to provide sufficient personal or household income, 13.8 % to acquire or increase future retirement pension entitlements and 5.1 % a combination of the two. Providing sufficient personal or household income is by far the most common financial reason.
Figure 5 shows the division of countries according to financial and non-financial reasons. More than 80 % of persons receiving an old-age pension who continue working in Norway and Denmark report that they do so mainly for non-financial reasons e.g. job satisfaction. In Romania and Greece, however, the main reason given by more than 80 % of respondents is financial. There is a geographical pattern, with work satisfaction being one of the main reasons to go on working in northern countries, while this is not the case in central and eastern countries. Estonia and Germany are exceptions, as they combine high employment rates with preponderantly financial reasons to continue working while receiving an old-age pension.
Another aspect to consider is the work intensity of persons who receive old-age pensions and continue to work. There is a clear link with reasons to continue working: those in receipt of an old-age pension who continue to work for financial reasons typically work longer hours than those who do so for non-financial reasons (see figure 6). Persons who receive old-age pension and continue to work usually work 22 hours a week in Denmark and 28 hours a week in Norway, both countries in which non-financial reasons are predominant. In Greece and Romania, where financial reasons to continue working dominate, the number of hours usually worked is 38 in Greece and 34 in Romania.
Early retirement
There are a number of policy measures that aim to facilitate early retirement for some groups of employed persons, in particular those who have not reached retirement age yet or those who have not built up full retirement entitlements. Early retirement schemes take different forms, including anticipated old-age pensions, disability pensions, early retirement pensions due to a reduced ability to work, early retirement pensions as a result of labour market conditions, long careers or long contribution periods, etc [2].
The 2012 ad hoc module looked at early retirement for persons receiving old-age pensions. In 2012 in the EU-28, 43.1 % of persons receiving an old-age pension took part in an early retirement scheme. In 22 Member States, over 20 % of persons receiving an old-age pension retired early. The highest proportions were reported in Italy (73.9 %), Ireland (68.5 %) and Spain (59.9 %) and the lowest in Bulgaria (5.2 %), the Czech Republic (5.3 %) and Estonia (10.9 %) (see figure 7).
Persons in early retirement schemes may continue doing some work, sometimes just a few hours: in 2012, as many as 12.6 % of persons in the EU-28 who had taken early retirement continued to do some work. This proportion was 47.7 % in Norway, 42.9 % in Iceland and 36.4 % in the United Kingdom.
This article also looks at the age at which persons retire through early retirement schemes. On average in the EU-28, persons aged 50-69 who receive an old-age pension and who took part in an early retirement scheme were 58.0 years old when they retired. Those receiving an old-age pension who did not take part in an early retirement scheme were 59.9 years old on average, i.e. an average of 1.9 years older (see figure 8).
This difference in age shows how many years early they took retirement under the early retirement scheme in question. It must be considered with care however, as other factors may also explain it. For instance, a statutory change in retirement entitlements would lead to a break in data comparability, e.g. if the legal change increases the retirement age, those who took early retirement after it came into effect might be older than those who did not take early retirement beforehand. A significant proportion of non-responses to this survey question may also bias the results.
Broken down by countries, the difference in the retirement age is biggest in Italy (a gap of 4.7 years, the difference between retiring at 61.5 and at 56.8), Ireland (a gap of 4.6 years, i.e. retiring at 64.1 compared to 59.5) and Spain (a gap of 4.3 years, i.e. retiring at 64.3 compared to 60.1). These countries are also among those having a higher percentage of early retirements, as figure 7 shows.
Data sources and availability
Source: Ad hoc module 2012 ‘Transition from work to retirement’ of the European Union Labour Force Survey (EU LFS) and other EU LFS data. The EU LFS is a large sample, quarterly survey providing results for the population in private households in the EU, EFTA and the candidate countries.
Reference period: 2012.
Coverage: The data for France cover the metropolitan territory (excluding overseas regions)
European aggregates: EU refers to the sum of EU-28 Member States and EA to the sum of the 18 euro area Member States. If data are unavailable for a country, the calculation of the corresponding aggregates takes into account the data for the same country for the most recent period available. Such cases are indicated.
Target population of the survey: The LFS ad hoc module for 2012 includes persons who live in private households, are aged 50-69 and who were working at the time of the survey or not working at the time of the survey, but who did work after the age of 50.
Definitions:
Employment: The concepts and definitions used to determine the labour status of individuals in the EU-LFS follow the guidelines of the International Labour Organisation. Employed persons comprise persons aged 15 years and more who were in one of the following categories:
- (a) persons who during the reference week worked for at least one hour for pay or profit or family gain.
- (b) persons who were not at work during the reference week but had a job or business from which they were temporarily absent.
This definition is applicable to employees, self-employed persons and family workers. Pay includes cash payments or 'payment in kind'(payment in goods or services rather than money), whether payment was received in the week the work was done or not.
Full-time/part-time: This variable refers to the main job. The distinction between full-time and part-time work is based on a spontaneous response by the respondent (except in the Netherlands, Iceland and Norway, where part-time is used if the respondent’s usual working hours are fewer than 35 hours a week and full-time if the respondent usually works 35 hours a week or more, and in Sweden where this criterion is applied to self-employed persons).
Retirement: The retirement is based on each person’s self-perception regarding his/her activity status “retirement or early retirement or has given up business”. For the reference definitions, please consult the MAINSTAT variable in the EU LFS explanatory notes.
Pension: The classification of a pension and the type of pension is based on each person’s self-perception regarding whether the type of benefit he or she receives is a pension. Only one general condition is required: the payment considered as pension has to be a regular and periodic benefit in cash -apart from salaries or wages- and including bank transfers, cheques and similar payments. The target definition includes pensions which are of any of the types: public or private, voluntary or mandatory, defined contribution or defined benefit. Afterwards the specific types of pensions are investigated: Old-age pension, unemployment pension, disability pension, survivor’s pension or other pensions. For the reference definitions, please consult explanatory notes and the mapping of pensions for the EU LFS ad hoc module 2012.
For an overview of the EU LFS concepts, classifications, questionnaires and other methodological issues, please see: EU Labour Force Survey – methodology (Statistics Explained) and for the ad hoc module 2012 “Transition from work to retirement”, please see: EU labour force survey - ad hoc modules (Statistics Explained).
Context
The EU LFS is the largest European household sample survey providing quarterly and annual data on the labour force participation of persons aged 15 and over and on persons outside the labour force. It covers residents in private households and is an important source of information about the situation and trends in the EU labour market.
Since 1999, it has been supplemented each year by ad hoc modules. There is a different ad hoc module every year. It aims to provide users with statistics on a specific topic related to the labour market by adding a set of variables to supplement the core data each year. The 2012 ad hoc module, ‘transition from work to retirement’, aimed to answer the following questions.
- How do persons leave the labour market?
- Why did they leave the labour market?
- Why did they not stay longer in the labour market?
- How long does the active population, aged 50 to 69, expect to be in the labour market?
The results of the ad hoc module are intended for use in the framework of the Open Method of Coordination in the field of pensions, for the Joint Social Protection, Social Inclusion report, and in the framework of the Europe 2020 Strategy, in particular for the monitoring of the employment guideline on increasing labour market participation.
See also
Further Eurostat information
Publications
- Labour market statistics - Pocketbook - 2011 edition
- European Union Labour Force Survey - annual results 2013 (Statistics Explained)
Main tables
Database
Dedicated section
Methodology / Metadata
- EU Labour Force Survey
- EU Labour Force Survey - ad hoc modules
- Statistical working papers / Manuals and guidelines
Notes
- ↑ The target group for the 2012 ad hoc module were residents aged between 50 and 69 who were employed or unemployed until the age of 50.
- ↑ The concept of early retirement can deviate significantly from one country to another. This causes restrictions on the quality and interpretation of the results between countries. For that reason the comparison of the data by country is limited and has to be exercised with caution.