More than two fifths (43%) of UK adults aged between 55 and 66 have chosen to take early retirement since the beginning of the pandemic, research from Canada Life has shown.
However, Canada Life warned that this could have a significant impact on savers, with analysis showing that accessing pensions before state pension age would reduce an average pension pot by 59%.
For example, someone who saved from age 20 until age 55 earning £25,000 and contributing 8% could have built a pension pot of around £117,468. However, if they continued to save until state pension age of 67, they could have grown their pot to £186,262.
Canada Life said its research found a third (32%) of people have retired completely, while one in ten (11%) have semi-retired. A further one in six (16%) have not yet retired but have reduced their working hours.
Nearly a quarter (23%) said their decision was driven by the desire for a better work/life balance, while 21% said their job wasn’t worth the stress. A similar proportion (19%) cited ill health or long-term health conditions, while 19% also said they no longer needed to work for financial support.
Of those who have taken a form of early retirement or reduced working hours, over a third (35%) are using savings and investments to supplement their income and a fifth (20%) have taken a lump sum from their pension.
Andrew Tully, technical director at Canada Life, said: “The drastic impact that the Covid-19 pandemic has had on everyone’s lives has played a part in shifting individual mindsets, making people reflect on and prioritise what truly matters to them.
“It’s good that people feel positive about their decision to retire early but the cost of living crunch will squeeze the finances of many, so we urge people to take stock of their finances before making any snap decisions. For the third of people who tell us they have fully retired, not only will those pension savings need to last for longer, but the pot sizes will be significantly smaller. Hopefully those who have fully exited the workforce have sufficient savings to see them through retirement.”
[Main image: Early retirement figures growing]
