Older workers rethink retirement plans as cost-of-living crisis bites

Growing numbers of older employees are delaying their retirement — or returning to the workplace after previously retiring — due to the cost-of-living crisis.

More than a third of over-55s who are still in work think they will carry on working beyond their state pension age, according to new research from Canada Life which found that financial concerns around funding retirement are the number one reason.

Half of those who expect to continue working think their pension will not be sufficient, while a quarter (23%) are not sure how long their retirement savings will last and nearly a fifth (18%) say they have not prepared for retirement.

“As inflation soars at double digit rates and the cost-of-living crisis continues to bite, we are seeing a growing number give retirement a second thought,” said Andrew Tully, technical director at Canada Life. “Not only are people now looking to work beyond their state pension age, but in some cases, we are seeing a retirement boomerang, with people either considering or returning to the workforce from retirement due to growing financial pressures.”

Separate research from Legal & General found that 46% of workers aged 55+ have had their retirement plans impacted by external factors such as the pandemic, Brexit and rising living costs.

Among those planning to delay their retirement, 1.7 million expect to keep working indefinitely in either part-time (19%) or full-time (9%) roles because of rising living costs. On average, pre-retirees plan to delay their retirement by almost three years.

It’s not all about earnings, however. Although almost two thirds (64%) cited not being able to afford the loss of income while living costs are so high as the top reason for delaying retirement, other reasons included people simply enjoying their jobs (26%) and not feeling ‘old enough’ to retire yet (25%).

For employers, the findings highlight the need to make sure older employees feel supported in the workplace. In a tight labour market, when many firms have found it harder to hire people, it’s more important than ever to hold on to experienced staff.

“Looking ahead, the older workforce is going to be critical to the recovery of the UK economy as it will help to alleviate severe labour shortages, however, it is also a warning sign that people’s finances are under significant strain,” said Andrew Tully from Canada Life.

“For anyone worried about how the extreme market volatility and cost-of-living crisis could impact their retirement savings, seeking the help of an adviser is a sensible step. Not only will they be able to discuss the options, but will help people plan the retirement they have worked long and hard for.”