4 reasons retirement is declining
Retirement has traditionally been a point in life when a person stops working and lives off their pension. This is no longer the case, though; the landscape of later life has changed, fuelled in part by the decline of final salary schemes and the introduction of new pension rules. From wanting to stay in the workplace to being unable to afford leaving the job, here are four reasons why people are remaining at work.
Can’t afford to retire
One of the big concerns people have is whether the pension fund will last as long as retirement, which can last up to 40 years. In YouGov’s report, Understanding Pensions and Retirement 2014, almost half of the respondents over 55 intend to continue working, with it being financially essential for almost a quarter.
This emphasises the importance of strong provisions. With generous tax relief and, in workplace schemes, employer contributions, pensions are unparalleled in saving for a later life income.
Don’t want to retire
YouGov’s report also found that the desire to remain part of the workforce was higher in people with larger incomes. Almost a quarter of respondents said they would miss the sense of purpose they get from their job, while the same number was concerned about boredom.
There is, of course, a huge difference between not wanting to retire and not being able to retire – choice. If you are at work because you want to be then you probably get satisfaction from the job and are doing what you want with your time. On the other hand, if you are at work because you feel like you have no other option then you are unlikely to be happy with the situation and may also be worried about money.
New rules make flexible retirement easier
It has long been possible to take up to 25% of a pension as tax-free cash, but recent changes now allow people to take the entire fund from the age of 55. The first 25% is still tax free, and the rest is taxed at the individual’s marginal rate of income tax (tax treatment depends on your individual circumstances and may be subject to change in the future). New options such as flexi-access drawdown make it possible to take a regular or ad-hoc income, varying the amounts as needed. This can complement a phased retirement as the income can be increased or decreased as necessary, whereas an annuity pays a fixed income for life and could be encouraging to give up work. Advice is necessary before making a decision though, especially as drawdown comes with a risk of depleting the fund.
Not only are many people in their 60s working in some capacity, some are running or starting their own business. Others have started something new since semi-retiring. The stereotype of retirement ushering in the age of slippers and daytime television has been shattered – the over 60s is a group that still has a lot to offer, with a wealth of knowledge acquired from decades in the workplace. The flexible pension options now make it easier than ever to either use some of the money to fund a new business venture or to supplement income as needed.
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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new
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