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Planning for a bigger retirement income

Looking forward to having more time to explore faraway places

Today, with more Britons living longer and healthier lives, the concept of retirement is much different to what it was only one generation ago. For each retiree, retirement is different. Perhaps you’re looking forward to having more time to explore faraway places, or maybe you dream of simply waking up each day and doing whatever takes your fancy.

However you see your future, retirement is a time for you to do the things you’ve always wanted to do. After all, deciding when to retire will be one of the most important decisions facing all of us at some point.

It goes without saying that investing in a pension is an essential part of modern-day financial life. If you want to enjoy a comfortable retirement, then starting to save early and ensuring you keep putting money aside is vital. These are some tips that could help you increase the money you have available in retirement.

Do you know where all your pension pots are located?
Locate pension pots that you may have forgotten about. The Pension Advisory Service and the Pension Tracing Service can help you to trace forgotten pension pots

Remember to take your State Pension into account

Time to consider topping up your pensions?
Think about topping up your pension in the years leading up to your retirement. That little bit extra could make a difference

Remember, you might be eligible to top up your State Pension too. This could be particularly beneficial if you’re self-employed or a woman, because it’s possible your State Pension entitlement may be low

From age 55, you can draw your pension savings as and when you need it and still pay into your pension. You’ll continue to receive tax relief on your payments up to age 75, although taking benefits flexibly will limit how much you can put in

Have you considered retiring a little later than you’d originally planned?
Delaying your retirement might give your pension fund more chance to grow Remember, though, if your pension fund remains invested, the value could go down as well up, and you may not get back what you put in. If you defer your retirement, it’s also important to check whether this will affect any state benefits you’re entitled to

Working part-time for a while after you finish full-time work might enable you to delay drawing money from your State Pension or your pension, meaning your money may last longer when you do retire

Maybe you fancy trying something new, like setting up your own business. Becoming your own boss could be a good way to stay active and keep earning

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Have you considered whether you or a relative may need to enter residential care or a nursing home in the future?   

Most will have considered a pension for the end of their working life, but this is an additional expense that many overlook. Care home bills alone can eat up £50,000 a year and who knows how long you might need to reside there. Specialist care for dementia patients is likely to be higher.

Whether you opt for a part or full-time carer in your home or move into a specialist residence, it’s not likely to be cheap. Your local authority may be able to cover some of the costs, if you are eligible, but may limit your choices. Eligibility will be decided based on whether you have savings or property, to specific limits, as well as pension income. It also depends on the type of care required.

Gifts

Gifts can be made throughout your life, in order to reduce assets, but not in lump sums to avoid paying care fees. You could fall foul of the rules if you rely on this idea.

Portfolio

So how do you make the most of any available investments and income? Investing for Tomorrow can help you to restructure your portfolio to generate an income stream to help cover funding gaps. You may also need to face the reality that your wealth will be spent on your future care rather than being left to your family or charity.

Power of Attorney

As you grow older, it is a good idea to prepare a power of attorney (POA) and to discuss your finances with your relatives so that they are aware of your wishes should you be unable to action them yourself. This safeguard ensures that your chosen appointee must act in your best interest, not in theirs.

Assets

It’s also important to consider all of your assets. Sites like mylostaccount can be useful in finding forgotten accounts. Property should be valued for letting purposes as well as sales. Equity release is also an option for those who are able to remain in their own home.

Insurance

Unfortunately, insurance policies are no longer available to pay for care unless you already have one. Instead you can buy an Immediate Needs or Care Fees Annuity (INA) where, in exchange for a capital lump sum, the annuitant will receive a monthly payment for as long as they survive. The advantage here is that an INA will continue to pay out no matter how long you or your relative live.

Investments

If you are comfortable investing, a stock market portfolio is also a possibility to generate both an income and capital gains. However, managing a portfolio to pay care home fees could mean following a different set of rules to the ones you use to run your own portfolio due to shorter timescales. Taxes and exemptions must also be considered.

Nobody likes the idea of getting old and not being able to adequately look after themselves or their family. Taking steps now could remove added financial burdens from many already tough decisions. For example, a POA can be made online.

Do feel free to get in touch with our planners should you need more information or help with any of the above.

t: 01422 349 131
e: info@iftwm.com

Cultivating the art of patience

Sticking with a long-term commitment to your investments

The longer you’re prepared to stay invested, the greater the chance your investments will yield positive returns. That means holding your investments for no less than five years, but preferably much longer. During any long-term investment period, it is vital not to be distracted by the daily performance of individual investments. Instead, stay focused on the bigger picture.

Putting your money into the market
Success in the stock market is all about time and patience. But it’s understandable that when you put your money into the market, you will be tempted to check up on how your investments are performing on a regular basis – and in our technology-driven age, you can monitor them 24/7.
Seeing investment prices fall, sometimes with alarming speed, can be enough to spook even the most experienced of investors. But remember that the reasons why you identified a particular fund or share as a sound investment in the first place should hopefully not have changed. The fall could just be down to market conditions as much as anything the individual company or fund manager has done, and in many cases, given enough time, investments should hopefully recover their value.

Leave your emotions to one side
However, at the same time, it is essential to leave your emotions to one side, because on occasion there could be a good reason to sell. Just because something appeared to be a good investment a year ago doesn’t mean it will be going forward.

Developing the art of patience will help keep you focused on your goals. Whatever happens in the markets, in all probability your reasons for investing won’t have changed.

Some investors develop their own exit strategy knowing in advance how far an investment’s value must fall or rise before they will consider selling. Such a plan can enable investors to ride out short-term market corrections and movements.

Help smoothing out your returns
Bear in mind, too, the benefits of so-called ‘pound-cost averaging’ during periods of market volatility. Essentially, if you are investing on a regular basis, your contributions will buy more shares when prices are low and less when they are expensive. Over the long run, this should help smooth out your returns, though there is no guarantee of this.

Too much tinkering not only undermines your investment aims but will also ratchet up the costs. Every time you buy or sell an investment, there’s a charge – sometimes several will be incurred. Investors can easily overlook the reality that by making even small adjustments, the charges can start eroding any profits earned.

Rebalancing your portfolio’s risk profile
As a result, for many investors, it’s best not to develop a regular buy-and-sell habit. And remember, no one knows which days will turn out to be the best trading ones – and by being out of the market, you could miss them.

For all investors, there will come a time when the portfolio needs to be rebalanced. A major reason for a realignment is when the actual allocation of your assets – be that shares, government bonds, corporate bonds or cash – no longer matches your risk profile.

Keeping your investments appropriately diversified
Alternatively, it may be because your investment horizons have shortened. Perhaps, for example, your retirement date is getting closer. These are solid reasons for selling some assets and buying new ones to keep your investments appropriately diversified. Any period of active portfolio management should be a process of change, which is both well planned and well executed.

It may be tempting to spend any income generated by your investments, but if you don’t need it in the short term, why not plough it back into your portfolio? This will increase the number of shares you own. And, of course, a bigger shareholding means more dividend payments next time around.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Transferring ISAs

Time to bring your investments together?

If you have accumulated a number of Individual Savings Accounts (ISAs) over the years, keeping them all in one place could give you better control and help you save money. There’s a common misconception that you can’t move your existing ISAs from one provider to another. Transferring your ISA doesn’t affect its tax-efficient status, but you should make sure that you don’t have to pay penalties or give up valuable benefits.

If you want to switch from an existing ISA provider to a new one, you’re perfectly within your rights to do so. Much like a mortgage, you shouldn’t feel as though you’re saddled forever with your first ISA provider choice. Transferring your ISAs could allow you to widen your range of investment choices, as the range on offer can differ between providers.

Easier to monitor and manage
Another reason to switch is that you could find you’re better off because another provider is offering lower fees and charges. You may also want to move because you prefer to keep all your investments conveniently in one place, where they’re easier to monitor and manage.

You can transfer your ISA from one provider to another at any time. You can also transfer from one type of ISA to a different type of ISA – for example, you can move money held in a Stocks & Shares ISA into a Cash ISA, or from a Cash ISA to a Stocks & Shares ISA. Similarly, money held in an Innovative Finance ISA can be transferred into a Stocks & Shares ISA or into a Cash ISA.

Not all ISA providers accept transfers
Remember that not all ISA providers will accept transfers. Also, bear in mind that the ISA provider you are moving from might charge you for the transfer. If you transfer cash from an existing ISA into a Lifetime ISA, it will count towards your £4,000 Lifetime ISA allowance for the year and qualify for the government bonus, but will not count towards your overall ISA allowance of £20,000 in 2018/19. It is not advisable to transfer from a Lifetime ISA.

Transferring your ISAs won’t affect their tax-efficient status, provided you follow the correct process. You might think that to make a transfer from one ISA to another, you’ll need to close down your existing account, make a withdrawal, then open up a new account and pay in. But closing down your current ISA means you’ll immediately lose all the tax benefits, so never withdraw your savings to pay into a new ISA.

Additional permitted ISA allowance
Instead, if you want to make a transfer, we’ll contact your provider to inform them and manage the entire transfer process for you. Remember that tax rules can change in future, and their effect on you will depend on your individual circumstances.

If you are looking to transfer ISA tax benefits following the death of your spouse or registered civil partner, the survivor can now inherit their ISA tax benefits. This will be in the form of an additional permitted allowance equal to the value of the ISA at the holder’s death and will be in addition to your own ISA allowance.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Understanding investment risk

Making informed decisions to improve your chances of achieving your financial goals

Your investment time frame will determine your risk profile to some extent, as this has a direct bearing on your capacity to take risk. Risk capacity is also influenced by factors such as your age, wealth, and the goals you are saving and investing for. Your capacity for risk is likely to change over the course of your life as your personal circumstances change.

If you understand the risks associated with investing and you know how much risk you are comfortable taking, you can make informed decisions and improve your chances of achieving your goals.

Risk is the possibility of losing some or all of your original investment. Often, higher-risk investments offer the chance of greater returns, but there’s also more chance of losing money. Risk means different things to different people. How you feel about it depends on your individual circumstances and even your personality. Your investment goals and timescales will also influence how much risk you’re willing to take. What you come out with is your ‘risk profile’

Different types of investment
None of us likes to take risks with our savings, but the reality is there’s no such thing as a ‘no-risk’ investment. You’re always taking on some risk when you invest, but the amount varies between different types of investment.

As a general rule, the more risk you’re prepared to take, the greater returns or losses you could stand to make. Risk varies between the different types of investments. For example, funds that hold bonds tend to be less risky than those that hold shares, but there are always exceptions.

Losing value in real terms 
Money you place in secure deposits such as savings accounts risks losing value in real terms (buying power) over time. This is because the interest rate paid won’t always keep up with rising prices (inflation).

On the other hand, index-linked investments that follow the rate of inflation don’t always follow market interest rates. This means that if inflation falls, you could earn less in interest than you expected.

Inflation and interest rates over time
Stock market investments might beat inflation and interest rates over time, but you run the risk that prices might be low at the time you need to sell. This could result in a poor return or, if prices are lower than when you bought, losing money.

You can’t escape risk completely, but you can manage it by investing for the long term in a range of different things, which is called ‘diversification’. You can also look at paying money into your investments regularly, rather than all in one go. This can help smooth out the highs and lows and cut the risk of making big losses.

Capital risk
Your investments can go down in value, and you may not get back what you invested. Investing in the stock market is normally through shares (equities), either directly or via a fund. The stock market will fluctuate in value every day, sometimes by large amounts. You could lose some or all of your money depending on the company or companies you have bought. Other assets such as property and bonds can also fall in value.

Inflation risk
The purchasing power of your savings declines. Even if your investment increases in value, you may not be making money in ‘real’ terms if the things that you want to buy with the money have increased in price faster than your investment. Cash deposits with low returns may expose you to inflation risk.

Credit risk
Credit risk is the risk of not achieving a financial reward due to a borrower’s failure to repay a loan or otherwise meet a contractual obligation. Credit risk is closely tied to
the potential return of an investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk.

Liquidity risk
You are unable to access your money when you want to. Liquidity can be a real risk if you hold assets such as property directly, and also in the ‘bond’ market where the pool of people who want to buy and sell bonds can ‘dry up’.

Currency risk
You lose money due to fluctuating exchange rates.

Interest rate risk
Changes to interest rates affect your returns on savings and investments. Even with a fixed rate, the interest rates in the market may fall below or rise above the fixed rate, affecting your returns relative to rates available elsewhere. Interest rate risk is a particular risk for bondholders.

Pensioner debt

Worrying increase on last year’s figure

The over-65s in the UK are expected to owe around £86 billion by the end of 2018, according to latest figures from the Centre for Economics and Business Research (CEBR) and More 2 Life. Total debt had increased on last year’s figure of £78 billion, as borrowing grew £35 billion in just three years. The research forecast that all types of secured and unsecured debt to retirees would exceed £142 billion by 2027.

When conducting the research, CEBR took borrowing including mortgages, credit cards, overdrafts, loans, car finance, hire purchase, student loans, payday loans and store cards into consideration.

Researchers have suggested that this increased level of debt is down to a number of factors, including this generation’s use of interest-only mortgages, current borrowing trends and relatively modest pension savings.

University of Birmingham’s college of social sciences Louise Overton said: ‘Worryingly, this report indicates that a significant minority are carrying secured and unsecured debt to help manage cash flow problems and make ends meet.’

Dave Harris, chief executive officer at More 2 Life, said the rapid increase in the retirement lending market ‘will only be exacerbated by an ageing population, people buying houses at a much later stage, and shrinking pension pots resulting in low retirement incomes.’

He added: ‘For growing numbers of people aged 65 and over, financial products that draw on the resource of housing wealth may well turn out to be the optimal way for them to solve the financial challenges they and their families have to face in future.’

Driving towards the next phase of your life

Getting the date right can help you reach your destination sooner

At some point you’ll say ‘goodbye’ to your co-workers, get into your car and drive towards the next phase of your life – retirement. But when will that be? The move to retirement is one of the most important decisions you’ll make, so it’s not surprising that determining the date is harder than you may ever expect.

However, most over-45s are not making plans to match their hopes for the future according to new research[1]. The vast majority (86%) of those aged 45 or over are already dreaming about escaping their working life for retirement, but only 8% of the same age group have recently checked the retirement date on their pension plans to make sure it is still in line with their plans. Over half (56%) don’t have a clear idea of when they want to retire, and only one in ten (10%) have worked out how much income they’ll need when they decide to stop working.

The study reveals that it doesn’t get much clearer as you go up the generations. Less than a fifth (17%) of those aged between 55 and 64 have recently checked to see if the retirement date on their pension policy still fits in with their plans.

Some people will have set their retirement date when they were in their 20s or 30s, and a great deal will have changed since then, including their State Pension age and perhaps their career plans. It may seem like a finger-in-the-air guess when you’re younger, but the date that you set for retirement on a pension plan does matter. It will often dictate how your money is being invested and the communications you receive as you get nearer to that date.

Reasons to keep your retirement plans up to date

Right support, right time
If the date you plan to retire changes or you simply want to take some of your pension without stopping working, it’s important to tell your pension company provider. Otherwise you may not receive information and support about your pending retirement at the most helpful times, as they’ll be basing this on your out-of-date plans.

De-risking investments
Some investment options will start to move your pension savings into lower-risk investments as you get closer to retirement. If you don’t have the right retirement date on your plan, you could be moving into these investments at the wrong time. For example, if you move into them too early, you could potentially miss out on investment returns that could increase the value of your pension savings. But if you move too late, you could be exposing your life savings to unnecessary risk.

Investment pot
The size of pension pot you need to build up to maintain your lifestyle when you come to retire will depend on when you plan to do so.

Income
If you’re planning to buy an annuity at retirement, which will guarantee you an income for the rest of your life, the amount of income you’ll get will depend on the size of your pot and annuity rates at that time. If you prefer to use your pension savings more flexibly, you can keep your money invested and take it as and when you require it. You’re then responsible for making sure your life savings last as long as you need them to.

Source data:
[1] Research was carried out online for Standard Life by Opinium. Sample size was 2,001 adults. The figures have been weighted and are representative of all GB adults (aged 18+). Fieldwork was undertaken in November 2017.

PENSIONS ARE A LONG-TERM INVESTMENT.

THE RETIREMENT BENEFITS YOU RECEIVE FROM YOUR PENSION PLAN WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE VALUE OF YOUR PLAN WHEN YOU DECIDE TO TAKE YOUR BENEFITS, WHICH ISN’T GUARANTEED AND CAN GO DOWN AS WELL AS UP.

THE VALUE OF YOUR PLAN COULD FALL BELOW THE AMOUNT(S) PAID IN.

When I’m gone

How a simple list can help your loved ones after your death

Although it may not feel like it, your family finances are probably more precarious than you think. It’s all well and good when the breadwinners are healthy and working, but if something unfortunate were to happen, the outlook for those around you could change instantly.

Research from Macmillan[1] highlights the worrying fact that two in three people living in Britain don’t have a Will – including 42% of over-55s. Without an up-to-date Will, the law could supersede a person’s final wishes and leave treasured possessions, money, property and even dependent children with someone they may not have chosen.
This news comes despite official guidance recommending that people review their Will every five years and after any major life changes[2], yet a quarter of Wills have not been updated for at least five years[3].

Top five things to do to help your loved ones after you have gone:

1. Write a Will
A Will ensures that the right people inherit from you, and while most of us know how important it is to have a Will and keep it up to date, many of us don’t do it. The research shows that three in five adults (60%) don’t have a Will, and a quarter (26%) of those are aged 55 and above. It’s especially important for cohabitating couples to have a Will, as the surviving partner does not automatically inherit any estate or possessions left behind.

2. Think about care of children
If you have children, it’s important to decide on guardians, but three in five (58%) parents with children under 18 haven’t chosen guardians should they die. Think about who you would want to step into this role, and ask them if they’d be happy to do so. Then make sure you appoint them as guardians in your Will.

3. Write a ‘when I’m gone’ list
More than one in ten (12%) adults admitted that it would be very difficult for anyone to handle their financial affairs after they died. Pulling together all your personal and financial information into one simple document can really help your loved ones when you’re gone.

4. Make a plan to pay for your funeral
Research shows that the average cost of a funeral is around £3,800, with one in six people (16%) saying they struggled with the cost. Having a plan in place to pay for your funeral will mean your family won’t have to find several thousand pounds at a difficult time.

5. Have a conversation with your family
Having a conversation with your family about your wishes can remove a great deal of uncertainty for them in the event of your death. The research shows that of those who have had to arrange a funeral, two in five (41%) were not left any instructions from the deceased. Starting a conversation might include talking about your funeral wishes with your loved ones or showing them where your important documents are kept.

Source data:
[1] Macmillan/Opinion Matters online survey of 2,000 UK adults. Fieldwork conducted 1–4 December 2017. Figures based on total population.
[2] Office for National Statistics. UK population mid-year estimate for adults aged 18 or over. Available from: https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/datasets/populationestimatesforukenglandandwalesscotlandandnorthernireland [Accessed 12 December 2017]
[3] https://www.gov.uk/make-will/updating-your-will

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Averting a later-life financial crisis

More retirees drawing pensions without LPAs

People are generally living longer these days. Increasingly, more people are living well into their 80s and 90s – and some even longer. This may mean you have a long time to budget for. That’s why it is very important to consider all of your options carefully and think about what will matter to you in retirement.

You can now access your pension in more ways than ever before, after the Government introduced wide-ranging changes in April 2015. These changes give you more options, so it’s important that you take time to think carefully before you decide what to do with your money.

Later-life financial crisis
Nearly 80% of retirees using the UK’s pension freedoms to manage their retirement savings face a potential ‘later-life financial crisis’ as they have not set up a Lasting Power of Attorney (LPA), a recently published report [1] has warned. There are two types of LPA. These are the Health and Welfare Lasting Power of Attorney, and the Property and Financial Affairs Lasting Power of Attorney.

The research found that 345,265 pensioners accessing their pension pots in this way have not yet given a family member or friend the legal authority to make decisions on their behalf if they were no longer able to do so.

Responsibility of managing income
The analysis underscores the scale of an issue that has emerged since the British government abandoned the requirement to buy an annuity at retirement. It has come to light that twice as many people are now opting for drawdown over annuities. In effect, this puts the responsibility of managing income in retirement on the individual.
Registering an LPA has become even more important since the pension reforms. Thousands of people are now making complex decisions on their pension into old age, when the risk of developing a sudden illness or condition such as dementia increases. Despite this, many are unprepared for a sudden health shock or a decline in their mental abilities. The time to set up an LPA is well before you need it.

Potentially creating problems
With more and more people moving into drawdown, this is potentially creating problems that could leave thousands of people facing a possible later-life financial crisis. It is vital to plan for a time when managing your pension might become hard, or even impossible, and obtaining professional financial advice is one of the best ways to do this.

Discussions with your family or others
An LPA can be a very important part of advance planning for a time when a person will not be able to make certain decisions for themselves. It allows you to choose someone you trust to make those decisions in your best interests. This can be reassuring, and making an LPA can start discussions with your family or others about what you want to happen in the future.

The stigma around the LPA, as with dementia, is compounded by its links to mental capacity. Some people are reluctant to consider a future where they may not be able to make their own decisions due to the connotations they associate with this. In cases where LPAs are not in place, assets and equity may be lost, or those in a vulnerable position may be forced to make decisions they are no longer able to cope with.

Source data:
[1] The study for Zurich UK is based on a YouGov survey of a UK sample of 742 people who have moved into drawdown since the pension freedoms were introduced in April 2015. The survey was carried out between 14 December 2017 and 24 January 2018.
FCA Data Bulletin (issue 12) shows 345,265 pots moved into income drawdown between October 2015 and October 2017. Assuming the number of people moving into drawdown continued at a similar rate from November 2017 to April 2018, this would equate to a further 86,316 people in drawdown. 345,265 + 86,316 / 5 x 4 = 345,265 people.
345,265 / 2 years of drawdown data = 172,632 x 10 years = 1,726,325 people.

PENSIONS ARE A LONG-TERM INVESTMENT.

THE RETIREMENT BENEFITS YOU RECEIVE FROM YOUR PENSION PLAN WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE VALUE OF YOUR PLAN WHEN YOU DECIDE TO TAKE YOUR BENEFITS, WHICH ISN’T GUARANTEED, AND CAN GO DOWN AS WELL AS UP.

THE VALUE OF YOUR PLAN COULD FALL BELOW THE AMOUNT(S) PAID IN.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS.

ACCESSING PENSION BENEFITS IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

Easing into retirement

Older workers are increasingly valuable members of the gig workforce

We tend to associate young people with the gig economy, but new research shows that older, more skilled workers are increasingly making the move. The gig economy has been enthusiastically embraced by millennials who favour the flexibility it offers, although it appears that it is older workers who might be benefiting the most.

However, over a third (36%) of gig workers aged 55 and over take on ‘gig’ jobs to help them ease their way into retirement, according to research from Zurich UK.

Published within Zurich UK’s ‘Restless Worklife’ report – based on UK-wide analysis from YouGov of over 4,200 adults, of which 603 were gig workers – the research found that the same amount (36%) said flexibility and being able to choose the work they take on was the main attraction. In fact, over one in ten of all gig workers questioned only expect to stop gig work when they are over the age of 75, almost ten years after passing State Pension age.

Number of over-50s working
The number of workers over the age of 50 has grown significantly over the past few decades, with government figures showing the employment rate for people aged 50 to 64 has grown from 55.4 to 69.6 per cent over the past 30 years.

However, the gig economy itself has attracted its fair share of criticism, with little job security or access to workplace benefits, given most are not defined as full-time employees. Lack of workplace benefits such as income protection, holiday and sick pay was put forward by 44% of gig workers over the age of 55 as the main drawback, while over a third (34%) said it was not knowing where their next paycheck would come from, and 27% said it was not having access to a workplace pension.

Popular choice for near-retirees
Not everyone wants to jump straight from working full-time into retirement, whether that stems from reluctance to stop a familiar routine or an enjoyable job – or simply because it will mean waving goodbye to a salary. As such, gig work is clearly a popular choice for near-retirees, allowing them to keep a form of money coming in without the traditional 9–5.

Instead of fully retiring, older people are using the gig economy to supplement or boost their retirement income, and it could play an increasingly important part in stretching out their pots as they live longer. However, as the world of work continues to change at a rapid rate, it shouldn’t come at the expense of financial protection, particularly as older workers are more susceptible to illness.