Millions of pre-retirees have started a ‘phased retirement’ but will living costs halt their plans?

by | Nov 12, 2022

Share this article

  • 3.3 million pre-retirees (34% of over 55s still in some form of work) have started phasing into retirement, by reducing their hours and responsibilities in anticipation of eventually entering retirement
  • Almost half of employees aged 55+ (48%) expect that they will take a phased approach to retirement rather than completely stopping
  • A phased approach to retirement could mean a reduction in income of £9,150 every year but products like fixed term annuities can play an important role in bridging this gap

Research from Legal & General has found that 34% of pre-retirees (those aged 55+ who are still in some form of work) have already started phasing into retirement – equating to 3.3 million3 employees.

The study reinforces the idea that retirement is no longer a line in the sand. Almost half (48%) of all employees aged 55+ expect that they will cut down the amount they work rather than completely stopping, with one in seven (14%) planning to wind down in the next year.

Many people want to take the phased retirement route by reducing their hours, so they can keep their job but lessen their stress (37%), however most people have revealed they are making the decision because they simply cannot afford to retire fully (44%).

Table one: When asked how people were planning to phase their retirements, the most common answers were:

How people are phasing retirement% of pre-retirees
Reduced working hours from a previously full-time role18%
Taken on a self-employed role to work less hours14%
Set up my own business to allow for a reduction in my hours11%
Agree to a reduction in your job role with your boss8%

Source: Legal & General, 2022

On average, over half (54%) of all people who are taking a phased approach to retirement are working 15+ hours less every month, consequently earning £9,150 less every year. As a result, many expect to have to adjust their lifestyle (38%), and some even anticipate they could struggle with meeting the cost of household essentials (17%).

Despite the intention to slow down at work, the cost of living has had an impact, with one in 10 people who had begun to phase into retirement having to increase their work commitments again. In addition, two fifths (40%) of people who anticipated gradually moving into retirement in the next five years now worry living costs might mean this plan is not possible.


Legal & General’s internal data shows the average income on an average pension pot (£73K) for a fixed term annuity (FTAs) taken out by someone aged 55 is £9,000 per year – which could bridge the £9,150 income gap caused by a phased approach to retirement. An FTA lets you use your pension pot to buy a guaranteed income, but for a specific period of time, with a lump sum at the end. This gives greater flexibility for those who want to bridge their income until another source of pension income kicks in.

“The number of pre-retirees considering a gradual or phased move into full retirement shows how much the perception of later life has changed in recent years. However people choose to approach retirement, it’s important they see it as something that should be actively managed, and not something they already feel they are ‘in’ or have ‘done’.

“For those wanting to keep their options open, while also looking for ways to supplement their income, flexible products such as fixed term annuities can play an important role. They provide a guaranteed income for a set time – in some cases as little as three years, helping to bridge any potential gap in salary.


“Most people find it challenging to navigate retirement at the best of times. With the increased pressures applied by the cost-of-living crisis, their money must go further than it ever has done. Ultimately, the key thing is to make sure people are making well informed decisions about what works best for them.”

Lorna Shah, Managing Director of Retail Retirement, Legal & General Retail

Share this article

Related articles

Sign up to the IFA Magazine Newsletter

Trending articles

IFA Talk logo

IFA Talk is our flagship podcast, that fits perfectly into your busy life, bringing the latest insight, analysis, news and interviews to you, wherever you are.

IFA Talk Podcast - listen to the latest episode