It’s been four years since Pension Freedoms were introduced. In that short time, it’s already changed retirement. Over 50s are increasingly likely to opt for a transitional retirement that offers flexibility and the right work-life balance for them.
In the past, giving up work on a set date was often the preferred method, entering retirement in one go. As work environments have become more flexible, it should be no surprise that retirement has followed suit. Changing lifestyles combined with more options when accessing a pension means the traditional retirement route has fallen out of favour. Today’s retirees are far more likely to approach retirement in stages than one fell swoop, and may even go back to work full-time at points when it suits them.
According to research from Aegon:
- Half of over 50s dismiss the traditional retirement journey, wanting a fluid transition instead, representing five million workers
- 26% think they’ll still be working when they start collecting their pension
- The trend isn’t driven purely by economics, keeping the brain active, enjoying work, and social interaction all play a role in the decision
Across Europe, UK workers are the least likely to stop work all at once and fully retire. In part, this is thanks to the introduction of Pension Freedoms allowing for a transitional approach to work in practical and financial terms.
Steve Cameron, Pensions Director at Aegon, said: “Work-life balance has never been more important to those over 55. Pension Freedoms have allowed them to throw off the shackles of traditional retirement and follow a plan that suits their individual needs. While historically people benefitted from generous Final Salary pensions, one drawback was they didn’t offer much flexibility to decide how and when to take benefits.
“The freedoms have changed the way people think about retirement and are enabling the rise of a more flexible transition into retirement, including allowing people to choose to start accessing some retirement savings to support a reduced work pattern.”
Finding the right income option
Should you decide that the transitional approach is right for you, there is a multitude of options. For some, simply cutting back hours may be right. However, requesting flexible working arrangements, working freelance or on a consultancy basis, or even setting up your own business are all alternatives. It’s about forging the path that’s right for your aspirations.
Spend some time thinking about the retirement you would like to begin with. From here, you can consider how work will fit around these plans. Of course, you may need to make some compromises, but having a clear idea of the ideal work-life balance you want to achieve can help you find the right opportunities for you.
The benefits of blending work and retirement
There are many reasons why you may be considering working in some form after your planned retirement, among them may be:
- Ease into retirement: Whilst retirement may be something you’re looking forward to, it can still be something of a culture shock. For many of us, our roles at work play a role in our overall identity and a source of pride. As a result, it’s not surprising that some people can find it difficult to adjust to retirement lifestyle. Continuing to work in some way lets you ease into it.
- Enjoyment from work: If you enjoy your work, giving it up completely might not be the right option for you. If you simply want more freedom to explore hobbies, travel or spend time with loved ones, cutting back hours or being self-employed can give you more control without having to jump fully into retirement.
- Social interaction: We spend most of the day at work so it’s likely that it plays some role in your usual social interaction. Whether you’ve become friends with a few colleagues or work in a social office, relationships at work may be important to you. Keeping some work commitments can help you retain those social interactions whilst you build a retirement lifestyle that allows for this too.
- Continue to improve skills: Keeping the brain active is often one of the most commonly cited reasons for remaining in work past traditional retirement age. Within your role, you’ll use the skills you’ve already developed and are likely to have opportunities to learn new ones too.
- Grow your pension: Choosing to work for longer can mean you have a greater income when you do decide to give up work. If you have a Defined Contribution pension, you can access it from the age of 55, but you don’t have to. Not accessing your pension whilst blending work and retirement naturally means your savings can stretch further. You may also decide to contribute further to your pension during this time, potentially benefitting from employer contributions too.
If you plan to blend work and retirement, we’re here to help you understand your financial position and get the most out of your retirement savings.
Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.