Recession delays retirement

The economic downturn has hit pension pots and forced more than a third of people over 55 to put off their retirement plans and continue working, according to retirement income specialist MGM Advantage.

The slump in the value of stocks and shares since the credit crunch has left many people with defined contribution pension schemes facing massively reduced pension pots. In March the FTSE 100 fell to its lowest level for more than six years.

The figures from MGM’s second annual Retirement Nation Survey, reveal that 35% of over 55s who are still at work – around 1.85 million people – have now decided to work longer than previously planned in order to replenish their pension pots.

According to the findings, 23% of over 55s have resolved to work beyond the State retirement age of 65. MGM Advantage is now warning that a large proportion of people approaching retirement are not prepared for life after work and are not fully aware of the drop in income the recession may have caused.

The research suggests that 32% of over 55s are ‘not prepared at all’ for retirement with a further 35% admitting to having done nothing to prepare for life after work.

Craig Fazzini-Jones, Director at MGM Advantage said:

“One of the most worrying consequences of the economic turmoil is the knock-on effect for those approaching retirement. Millions of people nearing the end of their working life have been forced to slog it out for a few more years to see if their pension pots will make any kind of recovery. For many it is not a choice, but a necessity.”

“It is hugely concerning that so many people are so unprepared for retirement. There is a definite need for those approaching retirement age to make the most of their pension pots and one of the best ways to do this is to compare the market for the best deal when it comes to converting your pot into annual income.”

However the recession hasn’t affected everyone. 48% of over 55s who have not retired say the recession has not changed their financial planning for retirement, while 13% say they are saving more to mitigate against possible losses elsewhere.

Mr. Fazzini-Jones added:

“If you are approaching retirement you have to balance living for now with how you want to live in the future. No other financial decision you will ever make effectively asks you to choose how you want to lead your life for the next 30 years, so it’s a big one to get wrong. Anyone with huge pension deficits must be wondering whether to hold fire before retiring in case things start to improve, or whether to cut their losses.”