More specifically, has the coronavirus pandemic disrupted your retirement plans?
Whilst the immediate focus of the pandemic has understandably been on the health impacts; it has become increasingly clear that there are many economic effects too. One of the clearest examples of this, is the billions of pounds spent by the government on employment and business support. There are, however, many others.
Research by the Institute of Fiscal Studies (IFS) has considered the consequences of the coronavirus pandemic on those approaching retirement. The study concluded:
Earlier Retirement for Some
Around half of those aged 65 and over who were working before the pandemic have retired earlier than planned.
This statistic is also supported by data from the Office of National Statistics, which found that the proportion of the population aged 65 and over in employment fell from 11.5% in December 2019 – February 2020 to 10.5% just 6 months later.
Later Retirement for Others
The fall in the stock market value in the early part of 2020 had the opposite effect for others who were close to retirement. As the value of fund-based pension plans declined, many delayed retirement while they waited for the market to recover.
Changed Retirement Plans
Whether they retired early or pushed retirement along, many people across the country have found that their plans had to change. In fact, one in eight of those aged 54 and over have revised their retirement plans.
Just over half of those within this group increased the age at which they planned to retire, while the remainder brought it forward. Unsurprisingly, the IFS found that the wealthier were more likely to be in the second category.
The pandemic’s effect on retirement has taught us many lessons, such as:
- You may not always be able to decide precisely when your working life comes to an end. Circumstances, such as the pandemic, can dictate the timing for you.
- You should build flexibility into your retirement plans. As the state pension age continues to increase, so too does the period between an early retirement and receipt of the state pension.
- Relying on work to supplement lowly pension benefits is a risky strategy. Health and economic issues can bring work to an abrupt end.
If your pension contributions have fallen during the pandemic, you should aim to rebuild them as soon as possible. A small shortfall today could make a much bigger hole in your pension when you retire.
After the tumultuous events of 2020, it makes sense to review your current retirement plans. With the possibility of pension tax reform in the spring Budget, the sooner you start the process, the better.