Record number of people set to retire in the next decade
The number of people retiring over the next decade will hit a record high, adding ‘big pressures’ to pension and health spending, a leading think tank warned, but it also creates opportunities.
For the first time ever in 2028, the number of people reaching state pension age will surpass 800,000 a year, and will continue rising after that.
According to Resolution Foundation, the 2020s will be marked by a steady rise in the baby boomer cohort retiring, adding “big pressures” in funding the ageing population.
It said state pension spending will increase by £24bn while health spending will increase by £52bn by 2030/31 compared to 2022/23 levels. This could push up taxes over the coming decade.
But it also said the mass exit of workers will be more than matched by a rising number of job entrants – the 2000-2010 millennial baby boom.
The foundation said the number of people hitting 22 – an age at which most people enter the labour market – will start rising again from the middle of the decade and is on course to surpass 900,000 a year from the first time in decades in 2032.
As a result, the UK workforce will become marginally younger by the early 2030s, even as the population as a whole ages.
It said the surge in young workers can cause big changes in the size of different job sectors and could create new opportunities for nascent industries which “will have a large pool of early-career young workers to draw from”.
Further, it could also make the labour market more dynamic as young people aged 18-29 are more than twice as likely to voluntarily move jobs as older cohorts.
But due to the aging population, spending patterns will also change. For example, a bigger share of recent retirees will increase overall non-housing spending by 3.8% up to 2030. And the amount spent on private healthcare could rise by 6.7%.
Marrying up the two cohorts of workers, the Resolution Foundation said there will be a boom in healthcare, citing figures from the Health Foundation which estimates an extra 488,000 healthcare workers, and an additional 627,000 social care workers will be needed to keep up with demand.
And spend on recreation and leisure is also likely to increase as older people spend a greater share of their income here. Meanwhile, the hospitality sector “could end the decade with a retiree-driven boom”.
Molly Broome, economist at the Resolution Foundation, said: “The changing size and shape of Britain’s population will have a profound effect on its economy over the coming decade. And while the fiscal pressures that a rapidly ageing population brings are well known, major changes to the jobs we do and how we spend our money are less well understood.
“The coming decade will be marked by mass exits from the labour market as the original baby boomer generation retires. But there’ll be an even bigger mass entry in the labour market, as those born in the millennial baby boom start to come of age. These two trends will spark big changes in our jobs market.
“The retirement of baby boomers will cause a huge boom in healthcare spending – and create over a million extra jobs by the end of the decade. But it will also spark a boom in the hospitality sector, as this generation are the real spenders when it comes to eating out and socialising.”