Are retirees running out of funds?

Covid-19 changed much of our day-to-day life, most notably, the shape of the UK’s workforce.

Indeed, almost half a million (493,000) people aged 50 and over left the workforce during the Covid-19 pandemic. Of course, there are many reasons for this, such as ill-health or looking after relatives; almost half (45%) cited retirement as their reason for leaving the workforce. 

However, current employment trends suggest that their retirement might be cut short. 

UK job vacancies rose to a new record of 1,300,000 between March and May 2022, marking an increase of 503,9000 from pre-COVID-19 levels. Businesses are crying out for more people to join their teams, with some targeting those retirees to tempt them back into the workforce in order to fill the gap.  

And unfortunately, it seems that many retirees might have to seriously consider accepting those businesses’ offers of employment, quite simply because they are at risk of running out of money. 

A ticking timebomb

Indeed, the introduction of the Pension Freedoms 2015 has made the prospect of earlier retirement more realistic than it has ever been. This is because people can now access their pension savings from the age of 55, meaning that they can withdraw part or even all of their pension if they wanted to. 

According to FCA figures, people are quick to cash in some of the smaller pension pots they have accumulated over the years (for example, if a person moves jobs frequently throughout their career, they may have gathered several pension pots which may be smaller than others), whilst leaving larger pots invested to continue growing over the years. This may sound like a logical strategy at face value, but this might not be the case given the current cost-of-living crisis. 

Indeed, the FCA has vocalised concerns that pension planners are not taking enough risk with their pension investments. The FCA’s leading concern is that people’s pension investments will not hold their value against inflation. Ultimately, this will drive more and more retirees back into work because their pension pots will have dried up. 

So, is the answer for retirees to move all their savings into riskier investments? 

Look before you leap

In short, for some, riskier investments will be the right choice. But others might not have the risk appetite suited to this new pension investment approach. The key will be to seek independent financial advice before making any major financial decision. 

Indeed, independent financial advisers, like our team at My Pension Expert, will assess the entirety of a client’s financial situation and retirement goals and help them to readjust their strategy accordingly. For some, this might mean moving their money into higher-risk investments. Whilst others might be better suited to a lower-risk flexible-access drawdown. Our advisers have clients’ best interests at heart, so their recommended approach will be tailored to the client’s specific needs. 

But don’t just take our word for it. Read Bill’s story, to see exactly how My Pension Expert was able to help his money work harder whilst allowing him to still enjoy his flexible retirement. 

The cost-of-living crisis is placing pressure on retirees’ finances. However, they needn’t feel they should rush back to work immediately. Instead, they would be wise to seek independent financial advice. In doing so, they will be able to develop a pension strategy that works for them and allows them to achieve a financially secure retirement.