The Great Retirement Wind Down: working part time after reaching retirement age could boost pension pots by tens of thousands

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• Almost half (47%) of those aged 18 to 24 intend to work part time in retirement age compared to just 17% of current retirees who chose to wind down work
• Standard Life analysis demonstrates that working 3 days a week from age 66 to 70 could add an extra £97k to a pension pot

Gradually easing into retirement by working 1, 2 or 3 days per week for a few years after the age of 66 can boost a pension pot by tens of thousands of pounds, new analysis from Standard Life, part of Phoenix Group, reveals, as research highlights how future generations’ view of retirement is shifting.  

Less than one in five (17%) current retirees moved to part time work once they reached retirement age, with the majority (76%) stopping work entirely, according to Standard Life’s Retirement Voice report¹. Younger generations, however, plan to wind down their working hours, with almost half (47%) of 18- to 24-year-olds anticipating moving into part-time work, while 29% expect to stop work completely.  

Pension pot can profit from winding down working hours  

With younger generations intending to carry on working part time after reaching retirement age, Standard Life has conducted analysis² which highlights how a gradual wind down of work can add a significant amount to the overall value of a pension pot. For example, someone that began working on a salary of £25,000 per year and paid the minimum monthly auto-enrolment contributions (5% employee, 3% employer) from the age of 22, could have a total retirement fund of £434,000 by the age of 66. However, someone that worked 3 days a week from the age of 66 to 70 could add £97,000 to their pension pot. Working just 1 day a week for a few years after reaching retirement age could add as much as £81,000 to a retirement fund. These figures are not adjusted for inflation.

Impact of working past retirement age 

_{*If beginning working with a salary of £25,000 per year and paying 5% monthly employee contributions and 3% employer contributions into a workplace pension at the age of 22 and assuming 3.5% salary growth and 5% investment growth per year. Figures are not reduced to take effect of inflation. Annual Management Charge of 1.00% assumed. The figures are an illustration and are not guaranteed. Earning limits not applied.}

Dean Butler, Managing Director for Retail Direct at Standard Life said: “People’s approach to retirement is shifting, with many preferring to gradually ease into retirement by reducing working hours rather than suddenly stopping work altogether. Younger generations perhaps realise that the onus will be on them, rather than their employer, to ensure they have enough to live in throughout later life and retirement. As pension policy has evolved, individuals now have much more responsibility for funding their own retirement which may mean working for longer, whereas older generations have largely benefited from Defined Benefit (DB) pensions which have provided financial security and allowed many to immediately move into full retirement.

“For future generations who will be retiring into a very different pension landscape than their predecessors, reducing working hours or taking on part time work can not only boost pension savings, but it’s also a healthy way to phase into retirement and start to understand what the day-to-day reality of life without work looks like. Of course, this only works if you’re not accessing your pension while reducing your working days – if you can live on your income from work, or have other savings.”

Catherine Sermon, Head of Public Engagement and Campaigns at Phoenix Insights, Phoenix Group’s longevity think tank, comments: 

“Part-time work can be a game changer for those who want or need to remain in work after state pension age, offering the flexibility for people to continue to earn and work while manging other life or health needs. Financially, there are huge benefits from maintaining an income from work as it means people may be able to reduce how much they take from their retirement savings each month or delay taking any out at all. For some, it may even mean they can continue to save and boost their retirement pot.

“The ‘hard stop’ retirement has been superseded by those opting for a gradual transition and it’s likely we’ll see a rise in people who will never fully retire. Part-time work plays a vital role in this changing approach, but we need to ensure we address the barriers people face accessing reduced hours working, especially later in life.”

ENDS

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Notes to editors

1 - Standard Life’s Retirement Voice research 2023: Boxclever conducted research among 6,350 UK adults. Fieldwork was conducted 26th July – 9th August 2023. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics.

2 - Calculations assume the following:

Starting Salary	£25,000
Employer Contribution	3.00%
Employee Contribution	5.00%
Investment Growth	5.00%
Salary Growth	3.50%
Annual Investment Cost	1.00%

Figures are not reduced to take effect of inflation.

Calculations are intended only for the sole purpose of providing an illustration regarding the projection of savings and pensions. They should not be used with the intention to give an accurate representation of real-world outcomes. 

About Standard Life 

• Standard Life is a brand that has been trusted to look after peoples’ life savings for nearly 200 years
• Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers’ pension scheme.
• Standard Life is part of Phoenix Group, the largest long-term savings and retirement business in the UK. We’re proud to be building on nearly 200 years of Standard Life heritage together.
• Our products include a variety of Pensions, Bonds and Retirement options to suit people’s needs, helping our customers to invest and save for their future. We’re proud to offer a leading range of sustainable and responsible investment options.
• We support our customers on their journey to and through retirement with comprehensive, easy-to-understand guidance so they can invest in the right way for their needs and plan a future they feel confident about.
• The value of investments can go down as well as up and may be worth less than originally invested.