A recent report from Canada Life has found that 13% of UK workers aren’t planning to ever give up work. If the survey results are indicative of the wider employment market, that would mean around 1.5 million Brits will never officially retire.
Covid triggered a shift in employee attitudes, manifesting as the so-called “great resignation”. The subsequent cost of living crisis has forced a further re-evaluation.
Some over-55s who gave up work during lockdowns have “unretired”, re-entering the workforce. Others have seen financial pressures force them to stay in work for longer.
If the pandemic and cost of living crisis have altered your plans, financial advice can help to ensure the decisions you make are based on your goals and aspirations, rather than on financial necessity.
Here’s how.
The cost of living crisis has altered retirement plans but early preparation remains key
More than a third (34%) of UK workers have altered their retirement plans in the face of rising living costs, including more than a quarter (26%) of over-55s – around 2.2 million people.
Early planning is important in any long-term retirement or financial strategy, but it’s also never too late to start. The average age for Brits to begin thinking seriously about retirement is 37, but if you’re asking yourself when you should start, the answer is probably “right now”.
Putting a retirement plan in place is a great opportunity to think about the type of retirement you might want, and how much this is likely to cost.
Staying employed for longer could mean switching to part-time work or even volunteering
The Guardian recently reported on the phenomenon of “unretirement”.
Early retirement during the coronavirus pandemic saw more than half a million older workers leave employment, resulting in a huge lack of experience in the jobs market.
Since then, the government have looked to coax economically inactive 50- to 64-year-olds back into the workforce. More on which later.
For now, you’ll need to think about how your retirement plans align with your long-term goals. If the pandemic or the cost of living crisis have altered your priorities, now’s the time to factor in these changes.
If lockdown left you craving social interaction, you might have decided that the traditional “cliff-edge” retirement is no longer for you. Phased retirement, or a move into the voluntary sector, might allow you to maintain your work-based social life while also enjoying some much-deserved downtime.
Equally, you might decide that the end of your career is the perfect time to branch out and try something new. The last few years have seen a rise in “olderpreneurs”. You might rediscover your ambition and look to start a new business venture during your retirement years. We can help you to iron out these plans.
Government tax incentives have implications for your estate planning
The chancellor used his 2023 Spring Budget to encourage pension saving into later life, and by so doing, looked to coax older workers back into employment.
By announcing the abolition of the Lifetime Allowance (LTA), the chancellor effectively removed the cap on pension savings. He also increased the Annual Allowance, meaning that you can contribute more to your pension each year while still benefiting from tax relief.
With the LTA charge dropped to 0%, and the Annual Allowance increased to £60,000 (from £40,000 in the 202/23 tax year), there is an increased incentive to work and save.
Jeremy Hunt also increased the Money Purchase Annual Allowance (MPAA). This is the reduced allowance that applies when you have already taken some of your pension benefits via flexible options. The MPAA increased from £4,000 in 2022/23 to £10,000 from April 2023.
You can start drawing from your pension while also remaining in work (in whatever capacity you choose) and contributing tax-efficiently (up to the MPAA) to any other pensions you hold.
Finally, it’s worth noting that continuing to pay into a pension that you don’t intend to ever draw from could shelter that money from Inheritance Tax (IHT).
Unused pension pots sit outside of your estate for IHT calculation purposes and can be passed on tax-efficiently on death, in some circumstances.
Speak to us if you think your pension pots could be used in this way and we can ensure you have beneficiaries in place, and sufficient non-pension income to sustain your desired lifestyle.
Get in touch
Whatever your retirement looks like, it’s vital you have a flexible plan in place and that your choices are driven by your aspirations, not financial necessity. To discuss anything raised in the above article, please email us at beyourself@murphywealth.co.uk or give us a call on 0141 221 5353.
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 Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
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