13% of older workers alter retirement plans due to Covid-19

More than one in eight (13 per cent) older workers have changed their retirement plans due to the Covid-19 pandemic, according to the Institute for Fiscal Studies (IFS).

Its survey found that 8 per cent of workers over the age of 50 planned to retire later, while 5 per cent planned to retire earlier.

The IFS said that this shows that timing of retirement is an “important means” of adjusting to financial shocks for older workers and illustrates how disruptive the pandemic has been to major life plans.

Older workers currently on paid or unpaid leave were 5 percentage points more likely to be considering retiring earlier than planned than those working not from home.

“This could be concerning if it represents individuals expecting to enter retirement earlier than they would like because they are discouraged about their prospects of finding new work,” the IFS stated.

“Those with more wealth are also more likely than those with less wealth to be planning to retire earlier as a result of the pandemic.”

Those working from home were 5 percentage points more likely than other workers to now be planning to retire later, which the IFS noted could suggest that changes to working practices are making it more appealing for older people to stay in work.

Furthermore, the research institute noted that the effect of stock market falls on pension savings was a driver of later retirement plans, with defined contribution (DC) scheme members who reported a fall in their pension wealth 6 percentage points more likely to be planning to retire later than those with no DC savings.

Evidence of the pandemic already impacting older workers’ retirement plans was also found. Half of the 6 per cent of 66-70-year olds and of the 11 per cent of those aged 71 and older that were working immediately before the outbreak but are now retired had not planned to retire around this time.

Commenting on the findings, Canada Life technical director, Andrew Tully, said: “Today’s research from the IFS shows the very real impact Covid-19 is having on retirement plans and aspirations across the country pushing some, and allowing others, to work for longer than expected.

“Societal changes have, and will continue to have, an impact on the way we live in retirement and it’s essential that advisers recognise the changing advice needs this will create.”

LEBC director of public policy, Kay Ingram, added, “These research findings highlight the importance of having a financial plan in place.

"A good plan should focus on starting retirement planning as early as possible, not relying on the later stages of working life to fund retirement, a multi-asset approach to building a pension pot (which helps to smooth out short-term shocks in the economy), reducing risk on a gradual glide path to retirement, annual reviews of the plan and making adjustments as retirement gets closer.”

“These are just some of the benefits a financial planner can provide to the increasing numbers of retirees whose retirement plans will depend on investment returns from their savings.”

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