Over 154,000 people aged 55-64 have decided upon early retirement because of redundancy and reduced income, a desire to reduce their risk of exposure to covid or the pandemic has made them reassess their priorities in life according to the latest LV= Wealth and Wellbeing Monitor.
Figures from the Office of National Statistics indicate unemployment among people aged over 50 has been rising sharply since the start of coronavirus pandemic.
Clive Bolton, managing director of savings and retirement at LV=, said: “Early retirement is a dream for many people but it can become a financial nightmare if it is forced on people without them having time to prepare.”
The LV= survey of 4,000 UK consumers reveals people are unprepared for retirement and that retiring five years early can significantly reduce an income in retirement.
Among those who were still working at the start of 2020, 3% (154,000) of those aged 55-64 have taken early retirement due to Covid, while 6% (313,000) of those aged 55-64 say they will retire later than planned to save more for retirement.
In addition, 4% (211,000) people aged 55-64 have accessed some of their pensions savings to supplement their income because they have been made redundant or their earnings are reduced.
Only a small proportion have looked at their pension value in the last year or researched how much they need to enjoy the retirement they want. 86% (32m) of UK non-retired adults have not checked the value of their pensions in the past year and, among those planning to retire in the next five years, 75% have not looked at their pension value in the last year.
Unfortunately, 59% (22m) are not confident they will have saved enough for a comfortable retirement and 34% who are planning to retire in the next five years are not confident they will have saved enough for a comfortable retirement.
Meanwhile, 11% of non-retired adults believe they will never be able to afford to retire.
Bolton added: “Early retirement is attractive for many people – but it can become a financial nightmare if it is forced on people without any planning because of redundancy or illness.
“Your 50s are critical years for retirement planning because that is the age when many people’s earnings and pension contributions peak. Being forced to end a career before you planned will disrupt retirement plans. Many will opt for early retirement and accept a lower income in retirement while others will switch to lower paid work and delay their retirement.
“Early retirement is expensive. Stopping work five years early means five years’ fewer contributions into a pension, five years’ fewer compounding of returns on your retirement fund and an additional five years withdrawing money from your pension.
“People who want to retire early and enjoy the retirement lifestyle they want need to do three things: review, plan and save. They need to check how much they have saved, plan when they want to retire and save enough to enjoy a comfortable retirement.
“It is a complicated financial decision and people considering it need to do a lot of planning and research so that they understand the pros and cons. Consulting a qualified financial adviser will help you develop a sustainable retirement plan while referring to the Money Advice Service will help people understand their options.
“Retirement can last a long time, maybe 35 years or longer, so it is important to think ahead to fund the lifestyle you want without running out of money or incurring unnecessary tax bills.
“Younger people with many years to retirement should make sure they join their employer’s pension scheme and save as much as they can. Older people should review how much their pensions are worth, how much they need to enjoy a secure retirement and what they need to do to enjoy the retirement they want.”