More people approaching the traditional retirement age are extending their working life. Whether circumstances mean it’s necessary to continue earning a wage or it’s your personal choice, there are challenges associated with working into retirement and it should affect your financial planning.
According to research from Aviva, there are 10.2 million workers aged over 50 in the UK, with 63% now planning to retire later than they thought they would just a decade ago. Despite being within 15 years of the current retirement age, 6.4 million people in employment are now adjusting their plans.
It’s a trend that means the number of workers aged over 50 has increased by 20% since 2012 and by
2020 they are expected to make up a third of the UK workforce. The shift is partly being driven by an increase in the State Pension age, which is expected to reach 68 by 2037, but other factors are playing a role too.
The research found the top reasons for extending working life:
- Rising cost of living (40%)
- Insufficient retirement savings (38%)
- Other (22%)
While finances are a critical part of making the decision for working past retirement age, for one in five there’s another factor influencing their choice. From enjoying work to staying active, there are many reasons those approaching retirement age choose to put off collecting their pension. Whether you want to retire soon or plan to work for a while longer, getting your finances and pension in order can make the transition smoother when the time comes.
The benefits of being an older worker
Even if working for longer hadn’t been part of your plans, the research from Aviva found that older employees have a lot to offer companies.
Having likely worked for longer in your chosen field, you’ve had an opportunity to build up a presence in your industry, an asset to many firms. It means that you can bring a wealth of skills and abilities to roles that younger generations are still honing. The Aviva research found that 37% of employees over 50 are confident about their relevant skillset, a higher percentage than younger colleagues.
While keeping up with the latest industry changes can be a concern for some workers approaching retirement, the research actually found that employees over 50 are more confident. While 36% of workers between 25 and 34 were confident in their abilities to keep up at work, this increased to 41% when employees over 50s were asked.
On top of that, those that have chosen to work past retirement age may have a better work ethic, as they see the benefits of working beyond the pay cheque.
Challenges facing older workers
Of course, there are challenges facing older workers too. According to Aviva, more than two in five (44%) workers over 50 feel unsupported by their employer. The lack of support can make working beyond retirement difficult to balance
Despite a slight improvement in businesses offering employees the ability to reduce working hours or work flexitime over the last six years, there’s been little progress in delivering guidance on retirement finances.
- 9% of employers provide written literature on the financial issues surrounding retirement
- 11% of workplaces offer free independent financial advice
- 3% of workers benefit from a list of recommended independent financial advisers (IFA)
- 14% of businesses offer workshops or seminars on retirement finances
As well as a lack of support, there are challenges to securing new roles and concerns around retaining a position once you pass 50.
Research from Moneywise found that a quarter of people over 50 and unemployed are worried about finding work, with just 1% confident in their chances of finding work in the future. In contrast, just 2% of people that were under 50 and unemployed said they worried about their abilities to find a job. Concerns plagued those over 50 and in employment too, with 20% saying they worried about losing their jobs.
What should your next steps be?
When you’re making plans for your retirement, what your next steps in financial planning should be hinge on whether you want to give up work or prefer the idea of continuing in your career (or exploring a new path in employment).
If retiring on time, in accordance with your original plan is your dream, there are things you can do to get there:
- Know how much you need to comfortably retire
- Maximise your State Pension by ensuring you pay National Insurance (NI) contributions, voluntary NI contributions, or apply for NI credits
- Make the most of your Workplace Pension now
- Maximise the amount you’re paying into pension products
- Account for life expectancy and care costs
If the idea of giving up work so soon just isn’t for you, there are some steps to take as you make plans to work for longer to ensure you’re comfortable in retirement when the time comes:
- Consider deferring your State Pension to increase the amount you receive when you do retire
- Contribute to your Workplace Pension for as long as possible
- Only use your pension to supplement your income where necessary
For advice on retirement planning, whether you plan to continue working or not, get in touch.