Financial pressures and insufficient pension savings are driving a significant number of retirees back to work, according to new research.
Standard Life found that almost almost one in 10 retirees aged over 55 have returned to work, with a further 6 per cent considering do so.
Money issues were behind many of these decisions, with a third (34 per cent) saying increased living costs were the main driver for returning to work. Meanwhile a quarter (27 per cent) said they had found their pension was not sufficient to cover day-to-day living expenses.
The survey, in the insurer’s latest Retirement Voice report, found that social factors are also a contributing factor, with 38 per cent of those returning to work said they were bored at home and 20 per cent reporting they were lonely.
Standard Life says given these financial and social issues many people may benefit from gradually easing into retirement, by reducing working hours before stopping completely. This can also help people to continue to build pension savings.
Its figures show that an individual, who started work on a £25,000 a year salary, making minimum auto-enrolment contributions from the age of 22, could have a total retirement fund of £193,000 by the age of 66 — figures in real terms, adjusting for 2 per cent inflation a year.
However, if this individual then worked three days a week from the age of 66 to 70 they could add a further £27,000 to their pension pot.
Meanwhile working just one day a week for a few years after reaching retirement age could add as much as £21,000 to a retirement fund – £18,000 from fund growth due to delaying starting to access pension savings from 66 to 70, and £3,000 due to the additional contributions of working one day a week.
Standard Life retirement savings director Mike Ambery says: “Money isn’t the only reason people return to work after retiring – but it certainly seems to be a big factor. Recent retirees couldn’t have foreseen the cost-of-living issues that have squeezed their retirement incomes, and many are now being forced to rethink their plans and return to work to supplement their income.
“Fewer people currently saving for retirement have gold-plated employer pensions, guaranteeing a set income in retirement, with more of us having to consciously engage and manage our own arrangements.
“It’s therefore vital for today’s workers to take an interest in their pension throughout their careers.” Ambery added that many workers could benefit from taking a different approach when it comes to accessing pension savings, which might include buying an annuity with a portion of their savings to cover essential day-to-day costs.
Phoenix Insights director Catherine Foot adds: “Returning to work can be hugely beneficial for over-50s when it comes to earning, saving and the sense of purpose it brings. While some have enough finances to retire early out of choice, many fall out of work in their 50s and 60s due to reasons such as caring responsibilities or ill health and plan to return as soon as they are able.
Phoenix Insights found the average total wealth for a 50-64-year-old out of work due to ill health is just £57,000, less than 5 per cent the wealth of those who retire early out of choice (£1.24m).
“However, the over-50s face significant barriers to re-entry. This is primarily due to a lack of opportunities and insufficient provision of good quality flexible work that people working later in life desire.
“Being out of work before state pension age is a major driver of pre-retirement poverty, so it’s critical the government and employers to better support this group to remain in employment. Providing access to flexible work is one of the most important factors to enabling this.”
