When do you plan to stop working?
According to new research, a third of over 40s plan to work beyond their state pension age.
The research from insurer Canada Life found that 31% of over 40s homeowners in the UK, who have not yet retired, plan to continue working after their state pension age.
This expectation to work into retirement is combined with a feeling of anxiety about income stability.
The research found that 39% of UK homeowners aged between 40 and 50, who are currently working, are worried about their job prospects now and in the future.
As things stand, almost a million over 45s are still on furlough, with the government’s coronavirus jobs retention scheme due to end in September.
According to the research, 31% of over 40s homeowners said they do not believe they can afford to retire when they want, and a further 30% are unsure about their ability to afford retirement.
When asked about plans to access pension savings, 27% of over 40s want to access the money saved for retirement as soon as it becomes available, which is age 55 as things stand. However, the minimum age for accessing money in a pension pot rises to 57, in line with a rising state pension age.
A further 25% said they plan to access their pension savings once they reach state pension age, and only 10% will delay accessing their pension savings while they keep working into retirement.
Andrew Tully, technical director at Canada Life, said:
“We have seen a seismic shift away from traditional retirements, driven by economic and social trends and it simply isn’t the cliff edge event anymore. The desire to continue working beyond state pension age is coupled with the fact that many people are nervous about their employment prospects in later life.
“However, for many, this is coupled with a desire to access their pension early. While this may help achieve some financial security in the short-term it means there are substantial doubts about the sustainability of the pension being able to support them through later life
“The Money Purchase Annual Allowance will unwittingly catch out ‘pension dippers’ who want to continue working, given the prevalence of workplace pension schemes. The MPAA is an arbitrary allowance which is easy to increase or remove altogether, and would allow savers to rebuild their pensions, especially in light of the pandemic and resulting uncertainty created.”
The Money Purchase Annual Allowance is applied when someone flexibly accesses taxable income from their pension savings and reduces the annual allowance for pension savings from £40,000 to £4,000 a year, making it harder to rebuild pension savings if you continue working in retirement.
Research carried out by Canada Life earlier this year found that 43% of over 55s who are still working were utterly unaware of the MPAA restrictions, and a further 40% didn’t know much about the details.