"With the concept of a fixed retirement date fast disappearing, people no longer excitedly count down the days until they receive their gold watch or carriage clock."
According to Aegon, whether through ill health, becoming physically unable to work, or redundancy, these factors all have the effect of limiting planned pension contributions and can have serious consequences on the value of a person’s pension pot.
The publication of these findings coincides with encouragement from the UK’s Chief Medical Officer, Dame Sally Davies, for individuals to remain in work beyond traditional retirement ages, but shows not everyone has this choice. The findings also have important implications for the review of state pension ages John Cridland is currently undertaking for the Government.
For more and more people, retirement means opting for a gradual transition from full time work into full retirement, with many choosing to work part time for a number of years. This partly stems from the need to supplement retirement income with a salary for a longer time, but also the desire to continue on in some sort of employment to remain socially, physically or mentally active, all of which can be beneficial for health. . But the reality is that not everyone has the luxury of choice: the research shows just half of the retiree population (51%) stopped working at the age they expected to.
People in the UK currently hope to retire to some degree at aged 642. However, this needs considered against a backdrop of increasing state pension age3 for future retirees, and means that many will need additional income until their state pension kicks in. Those forced to give up work early face the double whammy of a longer period with no state pension to draw on, and a reduced pension size due to lost pension contributions.
Steven Cameron, Pensions Director at Aegon said: "With the concept of a fixed retirement date fast disappearing, people no longer excitedly count down the days until they receive their gold watch or carriage clock. Indeed, an increasing number relish the opportunity to stay actively in work. The changing nature of work, attitudes towards retirement and greater pressures on income mean there’s no set pattern to retirement any more. The decline of generous final salary pension schemes, and the upswing in pension freedoms, means there is a greater onus on individuals to put enough money aside for retirement. Planning is key, and advisers are well placed to make sure those forced out of work earlier, as well as the 12% who retired later than anticipated, can optimise their retirement finances accordingly.
With the likelihood of further state pension age increases, a growing proportion of people will simply be unable to stay in work until their state pension kicks in This is why it is crucial for the government, and the Cridland review, to allow people access to their state pension from an earlier age, for example 60, at a reduced level to make it cost-neutral. This would mirror the pension freedoms we now have within private pensions and reflect the changing and more varied needs of individuals in later life.”
