Increasing numbers of Gen Z and millennials say they want to take a year-long break from work, in what is being dubbed a ’micro-retirement’.
In many cases these gap years are to boost their wellbeing and work-life balance, but research from Standard Life suggests that it could also help boost overall retirement savings if it results in people extending their working life.
‘Micro-retirement’ is the latest workplace buzz word, following recent trends of ‘quiet quitting’ and ‘lazy jobs’. However Standard Life says that while a year away from work is likely to lead to a short-term savings pause, working for longer may prove to be more lucrative in terms of overall retirement savings.
Standard Life’s Retirement Voice 2024 research found that on average, Brits currently hope to retire at the age of 62, six years earlier than the expected state pension age for those retiring after 2046.
At the same time, Phoenix Insights found that people in the UK tend to have a more negative perception of work than their international peers. It says that if a more fluid approach to work and retirement helped encourage people to stay in work for a further six year, this could lead to an additional £42,000 in the average pension pot.
Standard Life calculations shod that those who begin working aged 22 on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions, could build up a total retirement fund of £163,000 by the age of 62, adjusted for inflation.
Taking a 12-month micro-retirement at the age of 30, and retiring at 62 could lead to a pot £4,000 smaller. However someone who took a one-year ‘micro-retirement’ but then worked until the age of 68, could retire with a pot of £205,000 in today’s prices — £42,000 more.
Standard Life retirement savings director Mike Ambery says: “Taking a ‘micro-retirement’ might mean a temporary pause in pension contributions, however the trend offers a unique opportunity for your ‘proper retirement’ savings as well as shorter-term personal wellbeing.
“As you tend to be at your peak earning potential later in your career, saving for a few extra years just before retirement could have a disproportionately positive impact.
“Ultimately, the micro-retirement trend reflects a broader shift towards greater flexibility and work-life balance, and an acknowledgement that in future our lives are likely to be more fluid than the traditional education, then earning, then retirement structure. With the right support and planning, it could lead to a more sustainable working life, while still enabling financial security in retirement.”
