- 44% of these people plan to retire earlier
- 29% plan to work part-time in retirement
- 28% plan to retire later
New research1 by Canada Life has found that 1 in 5 (20%) over 50s have changed their retirement plans because of the pension freedoms, driven by the ability to access all of their pension savings from the age of 55. The retirement specialist has described this behaviour as ‘demob fever’ as official stats2 show most (72%) consumers who access their pots did so before the age of 65.
Of the 1 in 5 who have changed their plans, 44% are planning to bring forward their retirement and retire early (21% said by between 1 and 3 years and a further 23% are planning to retire at least 4 years earlier). However, 28% of respondents said they are now planning to retire later (13% by between 1 and 3 years later, while 16% said by at least 4 years).
Nearly a third (29%) of people changing their plans are looking to work part-time in retirement. The data shows a marked difference between men and women who have changed their plans. While 41% of women over 50 anticipate working part-time in retirement, only 20% of men plan to do so. Meanwhile men expect to retire one year earlier on average, while women do not envisage retiring earlier on average.
Andrew Tully, Pensions Technical Director at Canada Life, comments: ‘The increased awareness around pension flexibility has certainly made people sit up and rethink their retirement, with a significant number changing their plans as a result.
‘Official data shows most pensions are now accessed before state pension age, which demonstrates what a game changer the pension freedoms have been. The regulator has recognised the need to alert people to the fact that your 55th birthday should not necessarily be a starting signal to begin accessing your pension.
‘Whatever decisions people make on the back of flexibility around their pension choices, a critical first step will be to consult a professional financial adviser. An adviser will be best equipped to ensure that pension freedom ‘demob fever’ won’t cause problems further into retirement.’
In its recent Retirement Outcomes Review final report3, The FCA has proposed to mandate pension companies include clear, prominent and specific risk warnings in ‘wake-up’ packs that accessing the pension may not be in the best interests of the customer at this stage.
1. Source: The data in this release is from Canada Life’s annual Retirement Sentiment Index and is based on Censuswide polling conducted online between 06/03/2018 and 09/03/2018, surveying 1,003 UK adults aged 50 and over who are not retired and have a defined contribution or individual pension in place and are involved in financial decisions.
2. Source: FCA data shows that most pensions are accessed before age 65, either through being fully withdrawn or entering drawdown. Between April 2015 and September 2017, over 1.5 million DC pensions have been accessed, with most (72%) doing so before age 65. Over half (55%) were fully withdrawn and were mostly small pension pots (88% below £30,000). Nearly all those who fully withdrew had other sources of retirement income. FCA Retirement Outcomes Review Final Report (June 2018) page 4 https://www.fca.org.uk/publication/market-studies/ms16-1-3.pdf
3. Source: FCA Retirement Outcomes Review: proposed changes to our rules and guidance CP18/17, page 46 chapter 4.38 https://www.fca.org.uk/publication/consultation/cp18-17.pdf#page=4