Nearly half of workers furloughed (46%) during the pandemic have been forced to make changes to their retirement plans, new research from Canada Life has revealed.
According to the findings, almost three in 10 (28%) workers on furlough plan to retire later, while nearly a fifth (18%) say they will retire earlier than previously planned. Meanwhile, just over a third (36%) expect to finish work as previously anticipated and a further 18% are still undecided.
Canada Life said the over-55s appear less worried about the impact on furlough on their retirement plans than their younger counterparts. More than half (53%) of 18-34 years olds said they had made changes to their plans, compared to 34% of those aged over 55. Over a third (35%) of the younger generation now plan to retire later than expected, while just 10% of over-55s said the same.
Andrew Tully, technical director at Canada Life, said: “The government’s furlough scheme has been a lifeline for millions across the UK, however we cannot underestimate the number of people who will come out of this scheme in a challenging financial situation. This is demonstrated by the fact that many are changing their retirement plans, with a third of younger people planning to retire later.
“Interestingly almost one in four over 55s are actually thinking about bringing forward their retirement and leaving work earlier than planned. This could have serious implications for the economy with decades of experience potentially leaving the UK workforce just as we face a jobs and skills shortage.”
Tully warned of the impact of pandemic on people’s retirement savings, with 9% of over-55s accessing their pensions while furlough.
Many over-55s have flexibly accessed their pensions, with 7% using both their tax-free cash and drawing down additional sums, triggering the Money Purchase Annual Allowance. Despite this, 13% of over-55s plan to top up their pension once the furlough scheme ends.
Tully added: “Using your pension as a bank account might appear as the obvious way to prop up your finances following an economic shock, but you need to be aware of the hidden dangers lurking beneath the rush for cash.
“If you plan to continue working, and want to top up savings through a pension, then the Money Purchase Annual Allowance will bite in an arbitrary and restrictive way. It serves no real purpose apart from preventing savers rebuilding their pensions post furlough. I’m in favour of simply removing the restrictions, given most people are unaware of the limits, and who may well find themselves on the wrong side of the rules while trying to do the right thing.
“The other hidden danger is the interaction between pension dipping and the impact on any future benefit claims if you are unable to find work. This is a complex area and it is worth taking expert advice before rushing into any decisions.”
[Main image: mika-baumeister-unsplash]
