Changing tides of retirement


The traditional pattern of retirement is changing. Those now in their 40s and 50s may have assumed that they too would enjoy a retirement similar to their parents and retire in their sixties - with a substantial retirement income - often thanks to generous final salary pensions. However, in this new pensions landscape, retirement income is closely linked to pension contributions and the way people approach work in later life is changing. The State pension age has increased over the past few years and is likely to continue.


Changing work patterns

Over the last 30 years, the employment rate for people aged 65 and over has doubled, from 4.9% to 10.2%. It seems that people have embraced the notion of an extended, and often more flexible, transition from working life into retirement. A quarter of working age people expect to continue working full-time for as long as they’re able, and a further quarter expects to work beyond their State pension age on a part-time basis. Just 12% will stop work immediately upon reaching State Pension Age**. The younger working population are particularly comfortable with the idea that work won’t end at age 65. Nearly a third (31%) of millennials, those between 18 and 35, expect they’ll work full-time for as long as they’re able, 27% will continue working part-time and just 3% expect to stop working upon reaching State Pension Age.

Delaying retirement and reaping the benefits

While the traditional concept of retiring as soon as you reach State Pension Age is now out of date, a ‘flexible’ or ‘phased’ retirement approach is becoming more and more commonplace. It’s no secret that, in all likelihood, retirement may not be as prosperous as that of previous generations, and the State Pension Age is no longer the defining ‘retirement moment’ that it used to be. For some people, the decision to work on past ‘traditional’ retirement age will be a lifestyle choice, but for others, an inadequate pension pot may make it a necessity. Working a few years longer and continuing to save can dramatically improve retirement income. In fact, someone with an average retirement pot making the average level of contributions could see their pension income increase by as much as two thirds if they defer retirement for five years.


While we can’t turn back time, for those who are able, continuing to work for a few more years not only keeps putting money in the bank, it can also produce a substantial uplift in retirement income. Planning a retirement needs careful consideration and we recommend speaking with a financial adviser who can offer tailored advice to meet your personal needs and circumstances.


*Research conducted on behalf of Aegon UK by Censuswide. UK representative sample of 2,004 people. Fieldwork was undertaken between 9 and 12 December 2016.