3 key considerations if you’re thinking of delaying your retirement

The squeeze on households’ incomes means some people may end up working longer than they’d previously anticipated – and pushing back their retirement plans.

Others may want to delay retirement because they want to continue working, rather than needing to do so out of financial necessity.

Shona Lowe, a financial planning expert at abrdn, says: “Our recent research found that nearly two-thirds (58%) of UK adults over 40 are anxious about the prospect of leaving the world of work, with a fifth (20%) admitting they are very anxious. As a result, more than one in eight (13%) have delayed retirement or plan to delay retirement.”

Confused about your own retirement timeline? Lowe says there are some key considerations when thinking about delaying retirement. She shares the following tips…

1. Are there compromise options?

It doesn’t have to be all-or-nothing overnight. As Lowe says: “Part-time working in retirement, or flexi-retirement, is becoming an increasingly popular option for people at retirement age,” says Lowe.

Talk to your employer about weather going part-time is an option. You may also fancy a bit of a career change at this stage.

While retirement brings more time for family, friends and hobbies, it’s important to remember that work and employment also gives people a lot of social engagement, along with self-esteem and confidence, says Lowe. She adds: “Flexi-retirement is one option to spread some of these changes over multiple years.”

2. What are the financial considerations?

“If you semi-retire and need more income, you may decide to start taking that from your pension or topping up your monthly money from other savings and investments,” says Lowe. “If you want to make what you’ve built up work as hard as it can for you, you need to look at where you take your money from, in what quantities and when.

“Having a plan can ensure you make the most of the various tax allowances available to you, that you don’t accidentally move into a higher tax band and that you avoid paying more tax than you need.”

People may also want to consider their annual allowance – the most that can be saved in a pot per tax year before paying tax.

“The standard allowance for pension contributions is currently £60,000, but if you take money from your pension plans, your annual allowance will generally reduce, known as a money purchase annual allowance,” says Lowe.

3. Will there be charges?

“Before you go ahead with delaying your retirement, you should check whether the pension scheme you’re enrolled with will impose any charges or restrictions for doing so,” suggests Lowe. “Whatever your original plan was, you’ll need to let your pension provider know if you plan to delay retirement, and ideally you should do this as far in advance as possible.

“In some cases, the investments held in your pension may be set up to gradually become less and less risky as you get closer and closer to retirement – having the wrong date can mean your investments are on a trajectory that doesn’t match yours.”

Lowe adds that some people may want to consider speaking to a financial adviser, who can “help you map out what you’ll need at every step of the way”.