Plymouth (20/06/22) โ Flexible retirement is boosting the number of older workers, but also leaving many open to higher tax bills and more complicated finances, according to national IFA firm Continuum.
According to new figures from the Office for National Statistics[1], the number of over 65s in employment has more than doubled in the past 20 years.
Between February and April this year 11% of over 65s were in some form of employment, in comparison to 5.3% in the same period in 2002.
The number of over 65s who are fully retired, and therefore classed as economically inactive, has shrunk from 94.6% in February to April 2002 to 88.8% in the same period this year.
Table: Number of over 65s in employment vs economically inactive
Date | % over 65s in employment | % over 65s economically inactive |
February โ April 2002 | 5.3% | 94.6% |
February โ April 2012 | 8.9% | 90.9% |
February โ April 2017 | 10.4% | 89.5% |
February โ April 2022 | 11% | 88.8% |
Some prefer to keep working because they enjoy what they do and especially if they have their own business to run.
Suddenly changing to a sedentary lifestyle after years in a strenuous job may seem to trigger medical problems. Cutting down hours gradually can be a healthier option, providing more time to find new activities and interests โ the skills you need to make the most of retirement.
Whilst flexible retirement can be better for both your health and your wealth, it can be more complicated for your finances than stopping work altogether.
Paul Stocks, independent financial adviser at Continuum, said: โLiking what you do is one reason to consider flexi retirement, but with the cost of living rising, others will need to keep working for financial reasons. Flexi retirement not only keeps an income coming in, but an extra year or two of pension contributions could increase the size of your pension pot and level of pension income when you choose to fully retire. It increases your financial options.
โPension freedoms have made flexi retirement much easier to arrange than it used to be so I think we are likely to see the numbers choosing this option continue to grow.
โThe important thing is to plan how your finances will work and to remember flexi retirement may be rather more complicated than stopping work altogether. Avoiding the risk of paying too much tax, especially if you make withdrawals as well as contributions to your pension pot, demands real expertise.
โA good independent financial adviser can ensure that you make the most of your money when considering flexi retirement.โ
Martin Brown, Managing Partner at Continuum, added that recent rises in the base rate from the Bank of England have also added increased complexity for workers looking to plan a flexible retirement.
He said: โRate rises and other measures to tackle inflation mean potential complications for many aspects of financial planning, but particularly for pensions.
โA clientโs pension needs to last the whole of their retirement, which could easily be 20 years long or more, and be enough to pay for care if they need it.
โWith further rate rises seeming likely in the near future as the Bank of England continues to attempt to tackle rampant inflation, the best step those affected can take is to seek independent financial advice. A good financial adviser can help you understand the impact of an interest rate rise on your finances, and what action (if any) you should take.โ
There are several different routes mature workers can take into flexible retirement.
You may be able to arrange reduced hours working with your existing employer or look at getting a new part-time role that gives you the hours and the job satisfaction you want.
You can access your pension pot from the age of 55, and still go on to take your state pension at the state retirement age. There is still no need to stop work if you do so.
You can top up your income with withdrawals from your pension pot. Or, if you have enough money coming in from part-time working you can simply leave it invested and hopefully continuing to grow. If you have sufficient income, you can even continue paying into it.
Editors Notes - About Continuum
Continuum is a modern brand of financial advice. It is a partnership of like-minded Independent Financial Advisers sharing a common passion, approach and commitment to practicing true financial planning.
We are dedicated to providing a modern financial planning experience โ one that focuses on the client.
Assets under influence have increased to over ยฃ1.52bn
We believe that by creating a three-way partnership between Continuum, the adviser and the client, we also create an environment where each party can only succeed and grow if the other parties also succeed and grow.
Continuum is a trading name of Continuum (Financial Services) LLP which is authorised and regulated by the Financial Conduct Authority. Continuum (Financial Services) LLP is a Limited Liability Partnership
[1] Data from the Office for National Statistics from the Labour Force Survey. A05 SA Employment, unemployment and economic inactivity by age group (seasonally adjusted) released 14 June 2022. Full data set can be found https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/employmentunemploymentandeconomicinactivitybyagegroupseasonallyadjusteda05sa