CoronavirusSep 30 2020

Over-50s alter retirement plans in response to Covid-19

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Over-50s alter retirement plans in response to Covid-19

One in eight older workers have changed their retirement plans due to the coronavirus, according to the Institute for Fiscal Studies, which warned a third are now in a worse financial situation than they were in before.

Research from the IFS found 8 per cent of older workers now plan to retire later than they had previously intended, while a further 5 per cent plan to retire earlier.

Retirement deferrals were more common among those who had seen their pension fund fall in value, with individuals choosing to work longer to make up for the fall in wealth.

It was also more common among homeworkers, which suggests new working practices are making it easier and more appealing to stay in work.

Early retirements were particularly common in richer households and among workers who had been furloughed, which the IFS said could show a lack of confidence in finding a new job if they were made redundant.

Meanwhile, the research found a "significant minority" of older people who were working before Covid-19 struck have already retired.

Emily Andrews, senior evidence manager at Centre for Ageing Better, said it was “deeply worrying” to see many people now planning to retire earlier than they intended – including many who are currently on furlough.

She said: “That’s OK where it’s a positive choice, but for many it won’t be and will leave them poorer or in financial difficulty in later life. 

“We know that once out of work, over-50s struggle more than any other group to get back into employment, and we must not let a generation of older workers write themselves off prematurely.”

She called on the government to introduce targeted support for older workers, much like the Kickstart scheme for young workers.

Ms Andrews added: “We need to see targeted support for over-50s to get back into work, retraining opportunities for over-50s, and a strong message from government that over-50s are just as entitled to jobs as younger workers.”

Financial situation worsened

The IFS has also flagged that almost a third of older workers reported their financial situation had worsened as a result of the virus crisis.

The IFS said this suggests the crisis has widened financial inequalities within the older population and highlighted that over-50s in work were more worried about their future financial situation than those who are already retired.

Among those whose income has fallen since the outbreak of the pandemic, 23 per cent have household net wealth of less than £500 per person. 

In response to their falling incomes, 5 per cent had drawn on pension savings, 4 per cent had borrowed from a bank and 5 per cent had borrowed from family or friends.