June 15, 2023
If you’re not quite ready to fully retire, but the idea of re-calibrating your work-life balance is appealing, semi-retirement might be an option to explore.
You wouldn’t be alone. Recent research suggests that, among the UK’s over-55s, two in five people plan to gradually phase out working in advance of reaching the state pension age.
People are choosing semi-retirement as it enables them to balance their working life with travel, hobbies and family, whilst still earning an income. Phasing out work gradually is also a popular option as it eases the transition from career to retirement.
A common complaint about retirement is that going straight from working life, and a professional persona, into retirement can be a shock to the system, with professional/social networks breaking down. This can lead to retirement never quite living up to expectations, as people struggle to adjust to the changes. Semi-retirement offers a smoother transition, enabling you to adjust and focus on what truly matters to you in life.
A recent study conducted on behalf of Aviva has identified that 44% of 55-64-year-olds plan to move into ‘semi-retirement’ before they reach 65, allowing them to draw on their pension savings while continuing to work part-time.[1]
The study investigated changing attitudes towards employment and retirement as a result of the Covid-19 outbreak, and findings highlighted shifts in people’s emotional and financial wellbeing as they deal with post-pandemic job insecurity.
More than nine in ten (91%) people said they were ‘much happier’ after reducing their working hours, suggesting that semi- or partial retirement could be the solution for people who like the idea of having more freedom whilst remaining part of the workforce and retaining their professional status as well as some of their earning power.
As life expectancy continues to rise (more people than ever are living to age 100 or more), retirement can account for up to a third of a person’s lifespan. Plus, recent changes in government policy, such as the increase in the State Pension age to 67 in 2028, have caused people of all ages to reconsider their plans for work and retirement.
Over three-quarters of 18-34-year-olds, or 59%, say they intend to semi-retire before the age of 65, and this figure rises to 61% of those aged 35-44. It seems that the prospect of a longer working life is prompting younger people to consider a more flexible strategy to working when they are older.
That’s only part of the story, though. Partly prompted by the pandemic, many over-50s opted to retire early. Now though, according to recent ONS data, 48,000 over-50s have returned to the workforce. The government has been trying to encourage people who have retired or are considering retirement to return or stay at work either part-time or full-time, to help alleviate the UK’s labour shortages. It seems likely that the cost of living is also playing a significant part in the decision to ‘unretire’.
Continuing to work can help improve mental and physical health, and it can also keep loneliness and isolation at bay. The Aviva study indicates that many people actually prefer to work past the typical age of retirement. 80% of people over the age of 65 said they enjoyed the notion of working into retirement, with at least two in five, or 41%, of other age groups agreeing.
The study shows that semi-retirement can be a win-win situation for both employers and employees, as companies gain from preserving the skills and knowledge of experienced people, while workers can make decisions about maintaining a healthy work life balance and income in retirement.
Semi-retirement is a chance to experience the best of both worlds. Retaining a connection to the workplace is an appealing option for many people, either because they are still working towards their financial goals or because they are simply not ready to stop working.
Whether you choose to work part-time for financial reasons, or simply because you enjoy working, semi-retirement can be a great option for making the most of your retirement years. Whatever your age now, starting to think and plan ahead is a small step that can make a big, positive difference in the long term.
If you’ve already built up your pension pots and are getting ready to retire, you might be thinking about whether to take out a cash lump sum or use your pension to provide a regular income. You might also want to continue to pay into your pension pot while you are still working.
It’s important to understand the implications of accessing your pension pot, as it can affect the amount of tax you pay.
To discuss your retirement plans, get in touch with one of the Talis Independent Financial Advisers.
Source data:
[1] Research among 2,000 UK employees working in organisations with over 1,000 employees was conducted independently on behalf of Aviva by Quadrangle in February 2020, August 2020, March 2021 and June 2022. Not all figures add up to 100% as figures have been rounded throughout the report.
A pension is a long term investment not normally accessible until age 55 (57 from April 2028 unless plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up, 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.
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