Over two-fifths of 55-66 year olds have taken early retirement since Covid onset

Over two in five (43 per cent) UK adults aged 55-66 years old have chosen to take an early retirement since the beginning of the pandemic in March 2020, new research from Canada Life has revealed.

According to research, 32 per cent of older savers had retired completely whilst 11 per cent had semi-retired, with a further 16 per cent not yet retired but had reduced their working hours.

Canada Life believed that this acceleration in plans could have a significant impact on a generation of savers, as analysis from the company showed accessing pensions before state pension age would, on average, reduce a pension pot by 59 per cent.

As an example, Canada Life stated that someone who saved from age 20 till age 55, earning £25,000, could have built a pension pot of around £117,468 at a contribution rate of 8 per cent, but if they continued to save until state pension age this pension would have grown in value to £186,262, or 59 per cent more.

The research also explored the motivation behind the decisions for early retirement, with 23 per cent of people responding they were looking to find a better work/life balance and 21 per cent saying their job was not worth the stress.

Other key factors behind the decision for early retirement included ill health or long-term health conditions (19 per cent), a greater desire to spend more time with family and friends (18 per cent), wanting a change in lifestyle (15 per cent), and the impact the job was having on mental health (13 per cent).

Of those who had taken a form of early retirement or reduced working hours, the research found that 35 per cent used savings and investments to supplement their income, 20 per cent had taken a lump sum from their pension and 9 per cent used the funds from an inheritance.

Canada Life technical director, Andrew Tully, commented: “The drastic impact that the Covid-19 pandemic has had on everyone’s lives has played a part in shifting individual mindsets, making people reflect on and prioritise what truly matters to them.

“It’s good that people feel positive about their decision to retire early but the cost-of-living crunch will squeeze the finances of many, so we urge people to take stock of their finances before making any snap decisions.

"For the third of people who tell us they have fully retired, not only will those pension savings need to last for longer, but the pot sizes will be significantly smaller. Hopefully those who have fully exited the workforce have sufficient savings to see them through retirement.

“With retirement now lasting up to several decades, it’s vital for those approaching retirement to consider how they will fund the lifestyle they wish to live and speaking with a financial adviser is a sensible step. These professionals can help you decide the best course of action for your personal circumstances, ensuring you stay on track to enjoy the retirement you have worked hard for.”

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