There has been considerable focus in recent weeks on the government’s plans to coax middle-aged retirees back to the workforce in order to tackle the labour crisis and to boost economic growth.

According to the Office of National Statistics (ONS), for those people over the age of 50 , retirement was the most frequent reason given for leaving work during the Covid 19 pandemic.

Last month, the Chancellor, Jeremy Hunt, asked Mel Stride, the Work and Pensions Secretary to conduct an assessment of the barriers and incentives to work. This research found that 60% of people who had left their jobs since the start of the pandemic would consider returning.

The Pandemic Effect

It would appear that the pandemic caused many people who were close to retirement to reassess their priorities and many of them decided to shift away from stressful corporate life seeking work that offered more purpose or provided a greater work-life balance.

The Changing Retirement Landscape

Before the pandemic, in 2014, a Merrill Lynch Retirement Study in partnership with Age Wave, looked at the attitudes towards working in retirement. The study highlighted a distinct shift that had occurred in the retirement landscape from a traditional two phase approach to a four phase approach:

Traditional Two Phase Approach to Retirement

Phase 1 Pre-retirement

Phase 2 Leisure

A New Four Phase Approach to Retirement

Phase 1 Pre-retirement (five years)

Phase 2 Intermission (two and a half years)

Phase 3 Re-engagement (nine years)

Phase 4 Leisure

The new retirement landscape was driven by some fundamental changes to people’s retirement expectations over the last few decades including:

Increasing life expectancy.
The removal of Defined Benefit Schemes and the responsibility of retirement provision being passed to the individual away from the employer.
Increased economic uncertainty.
The re-visioning of later life.

Lets look at the two new phases in more detail.

Intermission

Those people surveyed for the Merrill Lynch study talked about wanting to take a break from the stress of their pre-retirement career in order to relax, recharge and re-tool.

Often this period of retirement can be seen as an extended sabbatical or gap year where people take time out to tick things off their bucket list and make some great memories.

The Merrill Lynch study suggests that this phase lasts for around two and a half years before many retirees look to re-engage with work.

Re-engagement

According to the Merrill Lynch study, retirees are four times more likely to ‘want to’ work rather than ‘have to’ work albeit the economic landscape was somewhat different in 2014 compared to the cost of living crisis some retirees are facing at the current time.

Compared to those in pre-retirement, people returning to work in retirement are five times more likely to work part-time. Those surveyed for the Merrill Lynch study said that their work is likely to be more flexible, fun and fulfilling as well as less boring and stressful compared to their pre-retirement careers.

The study also highlighted that retirees who continued to work in some form were more stimulated, connected to others and proud of their lives compared to those retirees who had stopped working completely.

Four Types of Working Retirees

Through their research, the Merrill Lynch study identified four types of working retirees:

Driven Achievers

These people feel at the top of their game and tend to be workaholics, even in retirement. They are more likely to seek ‘retire-preneurship’ or be self-employed.

Caring Contributors

These people seek to give back to their communities or worthwhile causes and over a quarter are unpaid volunteers.

Life Balancers

These people primarily want to keep working for the workplace friendship and social connections. These people are often looking for work that is fun and not stressful and they will typically want to work part-time.

Earnest Earners

The people in this group need the income from working in retirement to pay the bills. This may lead to a sense of frustration and regret at having to continue to work and they may not feel motivated or satisfied with their jobs.

The Challenge for Employers

According to research carried out by 55/Redefined, around 56% of employees do not want to retire by age 65, however, two-thirds of companies surveyed said that they encouraged staff to retire by that age.

So we have a situation where those in pre-retirement are looking to work for longer and those in retirement are looking to return to work. In addition, we have a worker shortage and a lack of economic growth.

It would appear that there is an opportunity for employers to attract those retirees seeking to return to work by offering jobs that are flexible, meaningful and provide a sense of connection.

The Challenges for Retirees Looking to Return to Work

Those surveyed for the Merrill Lynch report were asked how they prepared to re-engage with work and there were a number of responses which suggested that people should:

Start preparing pre-retirement by taking steps to expand their business network, taking classes, volunteering or working part-time in the field they are interested in.
Talk to their partner / spouse about their retirement work plans to understand each other’s concerns and expectations.
Talk to their current employer before they retire to discuss options for staying on but working more flexibly – a phased retirement.
If they are taking a break from work, determine how they will keep up to date and prepare to go back to work.
When planning for their retirement people should factor into their overall financial plan the income they expect to receive and how this could impact on the level of income they need to draw from their pensions.
People should consider any unintended consequences of returning to work, for example, automatic enrolment could be an issue for those people with protection against the pensions Lifetime Allowance. In addition, flexibly drawing benefits from a pension could trigger the Money Purchase Annual Allowance (MPAA).

Summary

Our job at Mangu Wealth Management is to help our clients live their best lives and to design a financial planning strategy to help them to achieve and maintain their ideal lifestyle. This is unique to each client and often involves planning for different phases within retirement which could include a period of work.

If you would like to discuss what retirement looks like for you, do get in touch using the button below.

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Retirement and the Myth of Economic Inactivity