The latest Second 50 research from Aegon UK has shown the UK population remains strongly in favour of a gradual transition into retirement, rather than a ‘hard stop’ where they stop work all together and enter ‘full retirement’.
Less than a quarter (24%) of workers expect to stop working all together. By contrast, a clear majority of workers expect to either change the way they work (43%), keep working as they currently do (15%), or move into a new role (9%).
Steven Cameron, Pensions Director at Aegon said: “Today’s retirees are approaching retirement very differently from previous generations.
“While historically, it was common to follow a ’9 till 5’ working life right up until a retirement age set by the employer, nowadays people have much more flexibility. But fears over Budget changes to pension rules could be discouraging a more flexible approach.
“One of the most striking trends in recent years has been the increased appeal of a ‘transition’ into retirement. This can take different forms – such as gradually reducing working hours, which can create a better work life balance. Pension freedoms also mean individuals can make up the shortfall in earned income by initially taking a small income out of their pension pot.
“Aegon’s latest Second 50 research shows this preference for a transition into retirement remains very strong. Less than a quarter (24%) want a ‘hard stop’ retirement.
“But it’s hard to plan such a transition unless the rules and tax treatment of pensions are stable. This year, like last, we’re seeing some people making snap decisions over their lifetime pension savings for fears of possible changes to pensions tax rules in the Budget. Some are taking their tax-free cash lump sum earlier than they would otherwise have, often accompanied by starting to take a retirement income sooner, something they could later live to regret.
“While not commonly known, many pensions allow individuals to take their tax-free cash in instalments over a number of years. This, alongside drawing out only as much income from your pension as you need at the time, might be the best approach, including reducing your tax bill. But planning this way isn’t helped if future rules are uncertain.
“Pension flexibilities and the ability to transition into retirement can mean more individuals continue in paid employment, perhaps in a reduced capacity, for longer. This can be good for the individual, both financially and for their wider wellbeing. The Government should also see this as a positive, as people remaining economically active for longer should boost UK economic growth.
“We urge this and any future Governments to prioritise creating a stable environment that provides people with the confidence to plan long term for their hard-earned retirement.”
