New research from Canada Life reveals more than two in five (43%) UK adults aged 55-66 years old have taken an early retirement since the beginning of the pandemic in March 2020.
According to the research by the pensions and insurance company, 32% have retired completely, while 11% have semi-retired. A further 16% have not yet retired but have reduced their working hours.
Reasons for retiring
When exploring the motivation behind retiring, semi-retiring or reducing their working hours, 23% were looking to find a better work/life balance, while 21% said their job wasn't worth the stress.
This acceleration in plans could significantly impact savers, as analysis from the insurance company suggests accessing pensions before state pension age on average reduces a pension pot by 59%.
The other key factors behind the decision included:
- 19% had ill health or long-term health conditions
- 19% no longer needed to work for financial support
- 18% had a greater desire to spend more time with family and friends
- 15% wanted a change in lifestyle
- 13% said their job was having an impact on their mental health.
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."
Retiring in 2022
Despite the increasing financial pressures people in the UK are facing with inflation at a 40-year high, 80% of early retirees have no regrets in making the decision to retire early.
"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 32% 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."
He added that he hoped those entering early retirement have sufficient savings to see them enjoy a comfortable living.
According to Canada Life, 35% of early retirees are using savings and investments to supplement their income, while 20% have taken a lump sum from their pension.
Some 9% were using funds from an inheritance, while 8% say they have a second income stream from a side hustle.
According to Canada Life, accelerated retirement plans can have a significant impact on savers even in normal times, as accessing pensions before state pension age could on average reduce a pension pot by 59%.
For example, someone who saved from age 20 until age 55, earning £25,000, could have built a pension pot of around £117,468 at a contribution rate of 8%.
However, if they had instead continued to save until the state pension age of 67, this pension would have grown in value to £186,262, or 59% more, due to interest compounding.
"With retirement now lasting up to several decades, it's vital for those approaching retirement to consider how they will fund the lifestyle they wish to live and speaking with a financial adviser is a sensible step.
"These professionals can help you decide the best course of action for your personal circumstances, ensuring you stay on track to enjoy the retirement you have worked hard for."
Talk to us about your plan for retirement.