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Delaying retirement

October 2020

by Chris Colclough

The current pandemic is forcing a widespread rethink of retirement plans.

The coronavirus (COVID-19) pandemic crisis has thrown the retirement plans of some of the nation’s retirees up in the air. As a result, a number of people over 50 and in work are set to delay their retirement (15%) by an average of three years, or keep working indefinitely (26%), as a direct result of COVID-19, according to new research[1].

The pandemic is forcing a widespread rethink of retirement plans. Currently, 1.5 million workers aged over 50 are planning to delay their retirement as a direct result of the pandemic. The most recent data from the Office for National Statistics highlights that the number of workers aged above 65 years is at a record high of 1.42 million[2]. However, if people change their retirement plans in response to the pandemic, this could increase considerably.

Five years or more retirement delay 

One in six people aged over 50 and in work (15%) believes that they will delay, while 26% anticipate having to keep working on a full or part-time basis indefinitely, due to the impact of the virus. On average, those who plan to delay their retirement expect to spend an additional three years in work. However, 10% admit they could delay their plans by five years or more.

These figures are significantly higher for the 26% of over-50s workers who have been furloughed or seen a pay decrease as a result of the pandemic. One in five of these workers will delay (19%) and 38% expect to work indefinitely.

Forced to rethink retirement plans

The financial impact of the COVID-19 pandemic seems to be particularly pronounced for people aged over 50 who are still in work. While some people will choose to work for longer, or indefinitely, the key consideration when it comes to this research is that it seems this decision has been driven by the financial impact of the pandemic, rather than personal choice.

According to the report, 1 in 5 (18%)[3] plan a change to their target retirement age, and 20% of over-55s who hadn’t accessed their pension prior to the crisis have since taken out money from their pension (12%) or are considering doing so (8%) because of the pandemic. The self-employed have been particularly affected, with 2 in 5 (40%) forced to rethink retirement plans and 22% now expecting to delay their retirement.

5 reasons to delay taking your pension
  • Your pension has longer to grow
  • You can maximise your investment potential before moving to safer assets
  • Your employer will keep topping up your pension
  • You’ll continue to receive tax relief on pension contributions until age 75
  • Delaying your State Pension can boost your payments
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    Impact on people’s ability to retire

    This is a key stage in people’s retirement planning, so seeing a material impact on household income will naturally lead to pessimism about achieving retirement goals. While it would be naive to say that these financial issues will not have an impact on people’s ability to retire, it’s important for people to have a strong understanding of the options available to them before concluding that their retirement needs to be delayed or forgotten indefinitely.
     
    That employment uncertainty, in combination with volatility in the financial markets, is understandably concerning to some people approaching retirement age. In particular, those who have been furloughed or seen a pay decrease could benefit from a financial review to assess their options before changing their plans.


    The content in this publication is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

     

    Source data:
    [1] Opinium Research ran a series of online interviews for Legal & General Retail Retirement among a nationally representative panel of 2,004 over-50s from 15–18 May 2020.
    [2] Office for National Statistics, Labour market overview, UK: May 2020
    [3] https://www.cofunds.aegon.co.uk/content/ukcpw/customer/news/covid-19_has_widereachingimpactonretirementplans.html

     

    A PENSION IS A LONG TERM INVESTMENT, THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.
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