FINANCE
BY MIKE SWAN , PARTNER AT AZETS
Careful consideration required before taking early retirement
IT IS THE DREAM OF MANY TO RETIRE EARLY . DURING THE COVID-19 PANDEMIC , 270,000 PEOPLE IN THEIR 50S AND 60S LEFT THE UK WORKFORCE , ACCORDING TO THE INSTITUTE FOR FISCAL STUDIES . THERE ARE , HOWEVER , SOME CONCERNS THAT THIS COULD LEAD TO RETIREMENT POVERTY , AS TWO THIRDS OF PEOPLE AGED 50 – 70 WHO QUIT WORK OR LOST THEIR JOB DURING THE PANDEMIC LEFT THE WORKFORCE EARLIER THAN EXPECTED . THIS MEANS THAT THEY MIGHT NOT HAVE THE FUNDS THEY NEED FOR A LONGER-THAN- ANTICIPATED RETIREMENT . THE ISSUE HAS BEEN EXACERBATED BY THE COST-OF-LIVING CRISIS THAT IS GRIPPING THE UK AND BEYOND .
The prospect of accessing pensions early could be appealing to negate this , but there are financial impacts that need to be considered before doing so .
Accessing pensions before reaching the required age could reduce them significantly and lead to savers running out of money earlier into retirement .
Those thinking about retirement should also undergo their own budgeting exercise to determine how long their savings will last , given the rates they anticipate spending down on their funds .
Compounding the issue is the fact that some of those who now want to re-enter the workforce are finding it difficult to get rehired . According to research from the Centre for Ageing Better , 27 % of all people aged between 50 – 64 are ‘ economically inactive ’, neither in work nor looking for work , this figure is up from 25.4 % before the start of the pandemic .
Early retirement may be enticing , but it certainly bears thinking about . Before acting , it is always a good idea to take financial advice and think carefully about the following factors :
• Do you know how much you ’ ll need to live comfortably in retirement ?
• If so , do you have enough in your pension pot for the lifestyle you want ?
• Do you have savings or any other source of income ?
• Do you still have a mortgage or any other outstanding debt you are still liable for ?
• Could working for just a few more years offer you valuable financial security ?
Do you have access to all of your pensions ?
Estimates suggest there is currently over £ 19bn sat in lost pension pots across the UK . These are typically the result of people changing jobs or moving houses and not keeping track of contributions made with previous employers . The good news , however , is that the government runs a free pension tracing service ( www . gov . uk / find-pension-contact-details ) to help employees track down their lost pensions . So , if you ’ ve worked for a number of different employers over the years it might be worth checking to see if you can be reunited with a long-lost pension .
Signs of an early retirement reversal
Data from the Office for National Statistics shows that the ‘ Great Unretirement ’ is in full flow . In a qualitative study of adults aged between 50 to 70 , 47 % of those asked , left work during COVID-19 for retirement related reasons . Surprisingly around 4 in 10 said they would return to paid work in the future .
Whatever your goals for retirement , we ’ re here to help you get into the best possible financial position for later life . Speak to your local Azets advisor for further information .
michael . swan @ azets . co . uk
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
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