PensionReforms' summary and comments
This 2006 report (co-written by one of PensionReforms' contributing editors) looks at the issue of 'phased retirement'.  It seems that those with the greatest opportunity to withdraw gradually from the workforce are those with the greatest opportunities to cope.  It looks at the US Health and Retirement Study (HRS) and, in particular, at six waves of the HRS between 1992 and 2002 in relation to 5,571 respondents who were working fulltime in 1992 and who were then aged 51 to 61 (mean 55.3 years).   The authors wanted to find out what factors influenced phased retirement; whether it extended working life and to look at the financial effects associated with it.

"The emerging picture of phased retirement is that of a process that is more available to persons who are best able to cope with change: those who are better educated, more financially secure, healthier, and in superior [management-style] occupational positions."

The authors also report that those who have a more positive attitude towards work were more likely to take up phased retirement.

The report finds that phased retirement seems not to be associated with shorter working lives overall and, over the measured period, seemed not to have a significant effect on household incomes.

The authors are unsurprised - the reasons for this finding include the fact that there is normally no formal employer-based 'phased retirement plan' so those with more initiative tend to take up available opportunities.  Also, phased retirement seems to happen more at the younger-old ages ".reflecting its role as a transition to full retirement."

That perhaps leaves open the possibility that employers might institute a formal 'phased retirement plan' to avoid losing key staff completely.

"Our study suggests that workers enter into phased retirement because they are able to negotiate arrangements with their employers. A policy change that encourages broad-based phased retirement might (or might not) affect the workers who would use phased retirement without the change. Ultimately, what we would like to know is whether a policy change would induce workers into phased retirement who otherwise could not access it, and whether such workers would be better off or worse off as a result." 

The report notes the difficulties involved in defining exactly what 'phased retirement' is:
"In this study, we define phased retirement according to changes in hours worked and how employees perceive their work-retirement status, but other definitions are possible. For example, this report does not consider changes in earnings (whether from reduced hours or reduced job responsibilities) or job sharing as indicators of phased retirement."

The report suggests that before future research in this area can provide useful comparisons, there should be a clear definition of what new research treats as phased retirement.  Is there a material difference, for example, between working reduced hours with the same employer ('phased retirement') by comparison with "retiring" from the "long term employer" and taking a reduced-hours role with a new employer ('partial retirement')?

"Despite the need for additional research, this study advances the state of knowledge about work retirement outcomes in general and about phased retirement in particular.  Specifically, we have begun to understand how phased retirement operates as a path distinct from other transitions from work to retirement.  We have also shown that phased retirees are a group with characteristics, including beliefs about work, distinct from those who do not enter into phased retirement.  Finally, we have started exploring the financial outcomes associated with phased retirement."

PensionReforms agrees that we need to know much more about the topic of this report.  Baby boomers may change the 'work to retirement' transition in just as dramatic a way as they have changed every other aspect of society.  The decline of Defined Benefit plans and growth of Defined Contribution plans, the improvement in mortality (though not necessarily morbidity as the report notes) and the increasing pervasiveness of technology-related jobs that are less physically demanding all point to greater potential flexibility in the transition to retirement.  It will also allow some flexibility in public policy issues like the setting of higher State Pension Ages and the implications that has for the cost of state pensions.  (File size 212 KB; 59 pp)  260