The number of people of working age who are retired is actually now lower than it was at the start of the pandemic, according to a new report.

By contrast there are around a third of a million more long-term sick.

The research from pensions and health consultancy LCP looked at what some have called the ‘great retirement’ during the pandemic and attempts to bust the government's notion that hundreds of thousands of people have taken early retirement.

That stems from the Chancellor’s 2022 Autumn Statement speech, in which he drew attention to a rise of 630,000 in the number of people of working age who have become ‘economically inactive’ since the start of the pandemic. 

Since Jeremy Hunt spoke out, work has been going on across government to understand the reasons for the phenomenon, and the March 2023 Budget is expected to include measures designed to get the number of early retirees back into the workforce.

However LCP’s new data suggests that it is the sick rather than the working age retired who, when asked, say they would like to work.

It showed that the number of long-term sick has risen by more than a third of a million - 353,000 - since the start of the pandemic.

That figure accounts for more than half of the growth in inactivity over the period, LCP said.

As a consequence it has warned that the government is trying to tackle the wrong issue.

That leaves the risk is that the Budget will contain announcements focused on tackling retirement when the real issue is more people getting into, and getting stuck in long-term sickness.

Former pension minister Steve Webb, partner at LCP warned: “There is a real risk of the government barking up the wrong tree when it comes to the growth in economic inactivity.”

He said policy solutions which aim to reduce early retirement or to encourage the retired out of retirement are likely to have only limited effect in reversing recent trends. 

Instead, the policy effort needs to be focused around understanding why flows into long-term sickness have grown and on early intervention to prevent people’s health from deteriorating. 

Mr Webb said: “Without action there is a risk of a growing core of people stuck in long-term receipt of sickness benefits with limited prospect of returning to paid work and damaged prospects for retirement.”

The report said the rise in long-term sickness seems to be because more people are flowing on to long-term sickness, particularly those previously classed as short-term sick.

LCP suggested that could reflect NHS pressures as those who would otherwise have been treated or had their chronic condition better managed and able to work now find themselves long-term sick as they wait for treatment or live permanently in poorer health.

Meanwhile numbers on sickness-related benefits have been rising steadily, with the growth pre-dating the pandemic, but now worsening.