Early retirees are missing out on huge pension sums by choosing to leave the workforce early, new research from Standard Life has revealed.
There’s been a sharp increase in economic inactivity in the UK since the beginning of the Covid-19 pandemic, particularly among people over 50.
However, analysis from Standard Life shows taking time out or leaving the workplace for good can cost retirees thousands of pounds. Someone who started working with a salary of £25,000 per year and paid the minimum monthly auto-enrolment contributions from the age of 22 could build a retirement fund worth £434,000 by the age of 66.
However, taking just five years out of the workplace at age 50 could see this figure fall by £48,000 to £386,000. Taking 10 years out would result in £94,000 less at age 66, while those who leave the workforce at age 50 and don’t return could lose out on almost £150,000, ending up with £285,000 in their pot.
Gail Izat, managing director for workplace at Standard Life, said: “The number of people neither working nor actively seeking work in the UK has increased recently. Though ill health and disability are cited as common reasons for people being economically inactive, the issues behind the Great Resignation trend are complex and diverse.
“For employers looking to retain their later-career employees, or keen to attract skilled older workers back into the workforce, considering a flexible working policy including flexible hours, home working and carers leave could help to create an age-inclusive environment.”
Izat urged employers to use “targeted communications” and provide employees with the option to see all of their finances in one place to gain an idea of the standard of living they would like in retirement and the pot size necessary to achieve it.
“This can then help them to make a decision about when it’s right for them to retire or leave the workforce, as well as boosting their financial wellbeing throughout their career,” Izat added.
