Millions are forced into retirement by illness, stress and redundancy

Many older people are being forced to take early retirement even though they can’t afford it, new research finds.

About 47 percent of retirees, or the equivalent of about six million people, stopped working earlier than they planned, but only about a third did so because they had already saved enough money to see them through old age.

Illness, stress and layoffs were other common reasons cited by people taking early retirement, and about a third said they were not in a good financial position to quit their job, according to the survey by financial services firm LV=.

The study found that one in four people who took early retirement did so at least five years earlier than they planned, and that men were more likely to do so than women.

But overall, 37 percent of women say they weren’t in a good financial position to retire early, compared with 22 percent of men, LV= says.

Separate research by Fidelity International found that 30 percent of retirees in the UK are concerned that they don’t have enough money to fund their old age.

About 24 percent of retirees with a pension shortfall have considered returning to work part-time.

>>>How to arrange your pension if you fear it will fall short – see below

LV= provides the following overview of reasons people gave for their early retirement. Some of the more than 900 retirees surveyed were motivated by more than one factor.

– About 31 percent, or the equivalent of 1.8 million people, said they could afford to retire early.

– And 27 percent said they no longer wanted to work.

– Of those who felt compelled to retire early, 25 percent left their job because of ill health or injury, 17 percent because of stress or mental health, 15 percent because of layoff and 6 percent to care for a partner or parent in poor health health.

– About 9 percent of people said they were retiring because they disliked their boss or the management at their employer.

Early retirement is a dream for millions and achievable for those who have saved for retirement for a long period of time, but it becomes a financial problem if you are forced to do it before you have time to prepare, says management van LV= Director of Protection, Savings and Retirement Clive Bolton.

‘People who retire earlier have less time to save in a pension fund and their fund has to last longer. They will have to accept that they may have a lower retirement income and a greater risk of running out of money when they retire.

“It’s helpful to have a good idea of ​​the lifestyle you want, how much it’s going to cost, and how you’re going to pay for it.”

Bolton says younger people who are concentrating on their careers, buying a house or starting a family can now take action to secure their retirement.

‘The easiest option is to participate in your company pension and save as much as possible. Making extra contributions early in your career can make a huge difference to the size of your retirement nest egg.’

LV= calculates that a 25-year-old investing £100 a month, taking into account an annual inflation rate of 2 percent over 40 years, could have a fund value of £87,300 in today’s money at 65. If you start at 35, this could bring in a fund of £58,300 in today’s money, and if you delay to 45 you could get £34,400.

It assumed that the amount saved increased at an inflation rate of 2 percent per year, excluding employer contributions, that it was supplemented by a tax credit from the base rate of 20 percent, that investment growth was 4 percent per year, excluding expenses.

Meanwhile, Fidelity International says retirees have considered the following measures to fund a pension shortfall.

“The rising cost of living affects each generation in different ways,” said Ed Monk, associate director of personal investing at Fidelity International.

Those in retirement face the challenge of covering increasingly expensive necessities through their retirement and investments – knowing that whatever they take out now will reduce their pot for the future.

‘Some are considering some form of return to work to supplement their long-term savings. While the number of vacancies across the country remains high, we are starting to see the number of available vacancies falling – meaning competition for positions will increase.

Retirees considering returning to work part-time should be aware of the impact this could have on their retirement, especially if they already have access to it or plan to do so.

“Under the Annual Cash Purchase Allowance (MPAA), once you receive money from a tax-advantaged pension, you can only contribute up to £4,000 a year to your pensions while benefiting from tax relief. Compared to the full annual stipend of £40,000, this could make a big difference to your future income when you retire.’