According to the IFS, a trend may relieve pressure on the labour market, but it is “no cause for widespread celebration” if it is a result of people becoming poorer.

A think tank suggests that people in their 50s and 60s are reconsidering their decision to retire early due to Britain’s cost of living crisis.

According to the Institute of Fiscal Studies, the squeeze on living standards brought on by the highest inflation rate in four decades was likely why more people aged 50 to 64 were seeking employment.

However, the think tank stated that it was too early to determine if the increase in economic activity among older workers in late 2022 began a trend and urged Jeremy Hunt to include measures in this month’s budget to encourage more over-50s to return to the workforce.

After the Treasury identified the decline in older workers as a critical factor in labour shortages, the chancellor is rumoured to examine ways to reverse the early retirement trend. 

Pension rule modifications are among the options under consideration.

In a report, the IFS stated, “The rise in economic inactivity since the pandemic is a priority for the current administration, with policies to increase workforce participation anticipated in the upcoming budget. “Most of the increase in inactivity has occurred among those aged 50 to 64. New data provide tentative indications that the trend may be reversing, although it is too early to tell for certain. This likely reflects the cost of living crisis.”

In the final three months of 2022, there was a considerable increase in the number of 50-to-64-year-olds returning to the workforce after a period of inactivity. 57% of the 197,000 50-to-64-year-olds moving out of inactivity are those who have been out of work for less than three years, as reported by the Institute for Fiscal Studies.

There are indications that a turning point may have been reached, and the UK may continue to see higher outflows from inactivity in the coming months.

The decrease in inactivity among those aged 50 to 64 proves that some individuals are far removed from the labour market than previously believed, according to the think tank.

Xiaowei Xu, a senior researcher at IFS, stated, “New data from the end of 2022 suggests that we may be witnessing an increase in the number of older people reentering the workforce and that this trend may continue. If “un-retirements” continue, this could alleviate labour market pressures. However, if the return results from the cost-of-living crisis, it is not a cause for widespread celebration, as it is a response to the deterioration of living conditions.”

“Over the longer term, the more important question is whether future companions will follow recent cohorts retiring early. The upcoming budget should take a broader view of labour force participation rather than focusing solely on reversing the changes made since 2020.”