46% of furloughed workers shift retirement plans

Nearly half (46 per cent) of furloughed workers have changed their retirement plans, according to research from Canada Life.

The survey revealed that 28 per cent of workers on furlough were planning to retire later and 18 per cent were planning to retire earlier than previously planned.

It also found, however, that around 36 per cent of currently furloughed workers were planning to retire at the same time, while 18 per cent were still undecided.

Younger workers in particular had more concerns over the impact of furlough on their retirement plans, with 53 per cent of 18-34 year olds changing their retirement plans, compared to 34 per cent of those over 55.

Furthermore, more than a third (35 per cent) of 18-34 year olds on furlough planned to retire later than planned, compared to just 10 per cent for the over-55s, and 23 per cent of over-55s expected to retire earlier, compared to 18 per cent of 18-34 year olds.

Canada Life technical director, Andrew Tully, commented: “The government’s furlough scheme has been a lifeline for millions across the UK, however we cannot underestimate the number of people who will come out of this scheme in a challenging financial situation.

“This is demonstrated by the fact that many are changing their retirement plans, with a third of younger people planning to retire later. Interestingly almost one in four over-55s are actually thinking about bringing forward their retirement and leaving work earlier than planned.

“This could have serious implications for the economy with decades of experience potentially leaving the UK workforce just as we face a jobs and skills shortage.”

The survey also found that 9 per cent of over-55s had accessed their pension while on furlough to make ends meet, with 7 per cent using both their tax-free cash and drawing down additional sums.

However, whilst 13 per cent of over-55s had plans to make additional savings or pension top ups once the furlough scheme ends, Canada Life warned that accessing their pension flexibility may have triggered Money Purchase Annual Allowance.

Tully argued that the MPAA "will bite in an arbitrary and restrictive way" and that it "serves no real purpose apart from preventing savers rebuilding their pensions post furlough".

"I’m in favour of simply removing the restrictions, given most people are unaware of the limits, and who may well find themselves on the wrong side of the rules while trying to do the right thing," he continued.

“The other hidden danger is the interaction between pension dipping and the impact on any future benefit claims if you are unable to find work. This is a complex area and it is worth taking expert advice before rushing into any decisions.”

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