We examine the role of ill-health in retirement decisions in Britain, using the first eight waves of the British Household Panel Survey . As self-reported health status is likely to be endogenous to the retirement decision, we instrument self-reported health by a constructed 'health stock' measure using a set of health indicator variables and personal characteristics, as suggested by . Using both linear and non-linear fixed effects estimators, we show that adverse individual health shocks are an important predictor of individual retirement behaviour. We compare the impact of our constructed health measure on economic activity with that arising from the use of other health variables in the data set. We also examine the impact of the 1995 reform of disability benefits on the retirement decision. Key WordsIll health Retirement Disability insurance JEL classification H55 I12 J26 AcknowledgementsWe are grateful to the Nuffield Foundation for funding the project: 'A study of health and the labour market behaviour of older workers', and to Sharon Witherspoon in particular. Executive SummaryThis paper examines the role of ill-health in retirement decisions in Britain, using the first eight waves of the British Household Panel Survey . To tackle the problem that self-reported health status is likely to be endogenous to the retirement decision, a two-stage method, as suggested by , is adopted. The first stage is to construct a 'health stock' measure that is cleansed of the effects of reporting behaviour reflecting labour market participation. This measure is then introduced into a reduced form model of labour market (in)activity. At this latter stage, modelling how labour market transitions are related to time variation in health and other characteristics, helps to eliminate any unchanging person-specific association between characteristics and the decision to work.The 'health-stock' measure is constructed by regressing self-reported health on a set of more objective health indicator variables and a set of other personal characteristics.Few personal characteristics, other than those related to health, are found to be significant in explaining self-assessed health. Many of the health indicators are significant in the model, and as expected having health problems is associated with reporting poor health.The panel structure of the data set is exploited to estimate a non-linear 'fixedeffects' model that allows an exploration of how time variation in various characteristics relates to transitions out of (and in to) work. Deterioration in an individual's health is found to be strongly positively associated with movement out of work. Sensitivity analyses suggest that there may be some asymmetry between the respective effects of health deteriorations and improvements on transitions out of, and in to, work.The final section briefly considers a reform to the public disability insurance programme in 1995, which both tightened formal eligibility conditions and reduced the economic incentives to retire via the disability insu...

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In this paper we use the two waves of the British Retirement Survey (1988/1989 and 1994) to quantify the relationship between socioeconomic status and health outcomes. We find that, even after conditioning on the initial health status, wealth rankings are important determinants of mortality and the evolution of the health indicator in the survey. For men aged 65 moving from the 40th percentile to the 60th percentile in the wealth distribution increases the probability of survival by between 1.0 and 1.9 percentage points depending on the measure of wealth used. A similar effect is found for women of between 1.1 and 1.3 percentage points. In the process of estimating these effects we control for nonrandom attrition from our sample. (JEL: I2, J19)

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We measure accruals in defined benefit (DB) pension plans for public and private sector workers in Britain, using typical differences in scheme rules and sector-specific lifetime age-earnings profiles by sex and educational group. We show not just that coverage by DB pension plans is greater in the public sector, but that median pension accruals as a % of salary are almost 5% higher among DB-covered public sector workers than covered private sector workers. This is largely driven by earlier normal pension (retirement) ages. For workers of different ages in the two sectors, marginal accruals also vary as a result of differences in earnings profiles across the sectors. The differences in earnings profiles across sectors should induce caution in using calculated coefficients on wages from cross sections of data in order to estimate sectoral wage effects.

We examine the effect of obliging employers to enrol employees automatically into a workplace pension scheme. We exploit the phased roll-out of automatic enrolment, by employer size, in the first country to do so nationwide (the UK), to estimate its effect on pension saving among private sector employees. We find substantial increases in pension participation and a rise in pension saving. Surprisingly, many newly enrolled employees received an employer contribution substantially above the (very low) minimum default level. Automatic enrolment also caused the pension participation of those employees who were not obliged to be automatically enrolled to more than double.

The UK has enacted a number of reforms to the structure of disability benefits that has made it a major case study for other countries thinking of reform. The introduction of Incapacity Benefit in 1995 coincided with a strong decline in disability benefit expenditure, reversing previous sharp increases. From 2008 the replacement of Incapacity Benefit with Employment and Support Allowance was intended to reduce spending further. We bring together administrative and survey data over the period and highlight key differences in receipt of disability benefits by age, sex, and health. These disability benefit reforms and the trends in receipt are also put into the context of broader trends in health and employment by education and sex. We document a growing proportion of claimants in any age group with mental and behavioral disorders as their principal health condition. We also show the decline in the number of older working age men receiving disability benefits to have been partially offset by growth in the number of younger women receiving these benefits. We speculate on the impact of disability reforms on employment.