Why flexible retirement could mean working into old age

27 February 2017

Workers who plan to reduce their workers hours once they are older and supplement their earnings with pension income could end up working into old age, according to new research from Royal London.

Its new study, the Mirage of Flexible Retirement, builds on previous research, which highlighted why saving at the minimum levels required by auto-enrolment could see people having to extend their working lives, and suggests the idea of a gradual or phased retirement could be a mirage for many.

The research investigates what would happen to somebody that saved for retirement at minimum auto-enrolment levels, and starts drawing their state pension as soon as they can enabling them to work part time.

In addition, it considers those planning a ‘gold standard’ retirement where retirement income is two-thirds of pre-retirement levels, and a ‘silver standard’ which assumes half of previous earnings.

It revealed that an individual seeking a gold standard retirement with no inflation protection or benefits for a widow or widower, would need to work until they are 79 before they could afford to retire if they plan to retire flexibly. This drops to age 74 if they are prepared to defer taking their state pension and remain in full-time employment.

If that individual only sought a silver standard retirement and retired gradually they would only have to work until they are 69, or 68 if they defer their state pension and work full time.

To get inflation protection and benefits for a spouse, Royal London claims our individual would need to work into his or her 80s.

The research highlights why it is so important to save more than the minimum required by auto-enrolment.


From April 2019 the legal minimum for auto-enrolment will be 8% (including a 5% employer contribution). However, if our individual is able to increase that to 10% he or she would knock three years of their working life. If they could boost their contribution to 12%, they would be able to retire six years earlier.

Royal London says that it should only cost workers just over £4 a week to boost their contributions by 1% (including tax relief and employer contributions and based on an average salary of £27,600 a year).

Flexible retirement ‘likely to be a mirage for million’

Commenting on the findings, Steve Webb, director of policy at Royal London says: “A flexible retirement, where we can gradually reduce our hours and stop work at an acceptable age, is likely to be a mirage for millions of people based on current levels of saving.  Those who opt for a gradual retirement, drawing a state pension as soon as they can and cutting their working hours could easily find themselves unable to afford to retire fully until they are in their late seventies or beyond unless they have built up a significant private pension pot.

“The good news is that there is an antidote to excessive working lives and this is higher rates of pension contributions.  We find that each 1% on pension contribution rates takes at least one year off the number of years for which you have to work to achieve a decent retirement. For those who want to have choices in later life about when and how they retire, doing more now to build up a decent pension pot is becoming essential. These findings need to be considered carefully by the government as it reviews the rules around automatic enrolment in 2017.”



In reply to by anonymous_stub (not verified)

I was born May 1956 and therefore instead of claiming my pension at 60yrs of age as expected I am now having to work until 66+ so in essence am deferring my pension for 6+yrs is that not so? I don't mind (much), having to defer my retirement but it is only fair that since it was expected that my pension would be payable at 60 it should be treated as a deferment of pension not that I should have the £50k approx. (that I would have received had I been able to retire at 60), stolen from me by the government / pensions office. How is that even legal, Is it even legal? It is surely theft, pure and simple!

In reply to by anonymous_stub (not verified)

I was born in Feb 1951 and have so far deferred my state pension,I still work 18 hours a week and would like to know if I should still continue deferring while I am still working and taking a small works pension which in total comes to about 15 thousand pound a year .When I do take state pension and still working should I take a lump sum or higher monthly payments I am 67years of age and have a few health problems but still able to work for a couple of years.I would be very grateful for any help and information regarding this .Thank You S.Barron

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