Ready for (Micro) Retirement? What a career break could mean for your pension

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• Returning refreshed and working for longer as a result of a year out could lead to a 42k retirement boost

Coming hot on the heels of 'quiet quitting' and 'lazy jobs', the emerging Gen Z/ Millennial trend of ‘micro-retirement,’ where individuals take relatively short, intentional breaks from work throughout their careers to boost their work-life balance and wellbeing, could boost people’s retirement saving in the long-run according to new analysis from Standard Life, part of Phoenix Group.

While a period of, for example, a year away from work could lead to a short-term savings pause, ultimately staying in work for longer due to greater fulfilment earlier in life could prove lucrative. Standard Life’s Retirement Voice 2024 research found that on average, Brits currently hope to retire at the age of 62, six years earlier than the expected State Pension age for someone retiring after the period 2044-2046¹. At the same time, Phoenix Insights found that people in the UK tend to have a more negative perception of work than their international peers. Were a more fluid approach to work and retirement to change attitudes and encourage people to stay in employment for six years longer, Standard Life’s analysis shows that savers could build up an additional £42,000.

Standard Life calculations find that those who begin working aged 22 on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions (5% employee, 3% employer) from the age of 22, could build up a total retirement fund of £163,000 by the age of 62, adjusted for inflation. Taking a 12-month micro-retirement at the age of 30 and retiring at 62 could lead to a pot £4,000 smaller, however someone who took a one-year ‘micro-retirement’ at the age of 30, but then worked until the age of 68, could retire with a pot of £205,000 in today’s prices, £42,000 more².

*assuming 3.50% salary growth per year, and 5% a year investment growth. Figures allow for 2% inflation. Annual Management Charge of 0.75% assumed. The figures are an illustration and are not guaranteed. Earning limits not applied.

Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group said: “Taking a ‘micro-retirement’ might mean a temporary pause in pension contributions, however the trend offers a unique opportunity for your ‘proper retirement’ savings as well as shorter-term personal wellbeing. We know that people who feel fulfilled and happy tend to stay in work for longer, so taking time out and returning to your working life refreshed and motivated could extend your career and leave you with a larger pot.

“As you tend to be at your peak earning potential later in your career, saving for a few extra years just before retirement could have a disproportionately positive impact. There’s a good chance people will be living longer in future and so retiring a few years later, with a bigger pension, could give you a better chance of ensuring your savings last as long as you need them to.

“Ultimately, the micro-retirement trend reflects a broader shift towards greater flexibility and work-life balance, and an acknowledgement that in future our lives are likely to be more fluid than the traditional education, then earning, then retirement structure. With the right support and planning, it could lead to a more sustainable working life, while still enabling financial security in retirement.”

ENDS

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Notes to Editors

¹Ipsos Mori conducted research among 6,000 UK adults.

² Calculations assume the following:

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. Figures allow for 2% inflation.

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 the 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.