Financial pressures forcing pension freedom retirees back to work
July 12, 2019
- A quarter (26%) of retirees returning to work after unlocking their pension say it is because they are struggling financially
- Two in five retirees (41%) are clocking back in because they lack a sense of purpose while more than a third (35%) are looking to give their social life a boost
- One in 10 (11%) women heading back to work do so to get away from their partner – twice the number of men.
One in four (26%) retirees returning to work after dipping into their pension say it is because they are struggling financially, according to new research for Zurich.
More than a quarter of people who have gone back to work since the pension freedoms cited financial pressures as among the reasons for clocking back in.
Since the pension reforms were introduced in 2015, savers have been able to take a 25% tax free lump sum from their pension, and draw money flexibly, like a bank account.
Latest figures from HMRC show more than half a million over-55s have withdrawn cash from their pension in the last tax year alone, taking a collective £8.18billion* – a jump of 23% compared to the previous year.
But there are a fears savers are not planning properly for retirement, which is forcing some back in to work.
Alistair Wilson, Zurich’s Head of Retail Platform Strategy, said:
“There’s no doubt the pension freedoms have been hugely popular but for some retirees they have come at a high price. People now face more complicated decisions in retirement – including choosing where to invest their savings and how much to withdraw - and it’s clear not everyone is getting it right. Pensioners who don’t plan for retirement, and get financial advice or guidance, could face a return to the grindstone or an impoverished old age.
“Making a mistake with your pension in later life can be financially devastating – especially if you can’t go back to work. One of the most important steps you can take is to calculate how much you have to live on. By working out your income and expenditure, and considering how long you might need to make your savings last, you can reduce the risk of emptying your pension too soon. There’s a lot to think about when you’re planning for retirement, and your circumstances will change over time, which is why it’s often best to speak to a financial adviser.”
Overall, one in 10 (11%) of people who have accessed their pension since the 2015 reforms have gone back to either full or part time work, or say that they intend to. Asked for all the reasons they have returned to work, 41% of retirees – the highest percentage – said they needed a sense of purpose. Some 35% said they missed the social side and 20% because they were bored.
One in 10 (8%) said they went back to work to give them time away from their partner, with women (11%) twice as likely as men (5%) to want to escape away from their other half.
“It’s not just the financial side of retirement that people need to prepare for. This can also be a stressful time for couples who previously spent most of the working week apart. Living with your partner without the diversion of work can be a significant transition and might take some getting used to.”
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2028 adults, who have accessed their DC pension since April 1st 2015. Fieldwork was undertaken between 18th - 29th April 2019. The survey was carried out online.
*HMRC: Flexible Payments from Pensions: April 2019 Official Statistics
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