We are all going to stop work at some point and clearly it isn’t something we are trained for. However, recent retirees are concluding that they could have made better choices from a financial, social and fulfilment point of view if they had sought advice sooner. This is best explained by looking at two simple examples.

Mr Smith – He stopped completely at age 60 after a successful career working for a mid-sized engineering company. His state pension won’t start until age 67 and he is now drawing heavily on his pension fund to fill the 7-year gap. As winter approaches he is beginning to realise that his days are rather empty, and most of his friends are still working, at least part-time. Although not every day at work was bliss, he now realises he had experience and skills that were rare, and he could easily have stayed working for longer, at his old firm or at another local firm. This was unexpected for Mr Smith, but he now acknowledges that he misses the camaraderie he got from his work colleagues, as well as the respect they gave him for his wealth of experience. Mixing with his younger work colleagues also helped him keep up to date with technology and popular culture. There were also social events that he enjoyed but now doesn’t get invited to.  

Mr Jones – Worked at the same firm, and also thought age 60 was time to make a lifestyle change. However, he decided to carry on working for only 3 days a week. They would like him to help with some of the same projects but also help with some driving and other more administrative tasks. This would give him from Saturday to Tuesday to take short holidays, go walking, do some DIY and basically do what he wants. As his mortgage is all paid off, he has quite low expenditure, and his earnings will still be enough for him to leave his pension untouched. In fact, his employer will still carry on paying into his auto-enrolment pension for him, albeit at a lower rate. He is not worried about his pension running out between now and age 67, in the same way that Mr Smith is. Mr Jones now enjoys his work/life balance more, he enjoys going in from Wednesday to Friday only, and is still invited out on social events.

Who’s got the best approach, Mr Smith or Mr Jones?

From the examples above, we can see that Mr Smith is soon likely to be one of the 2.8 million over 50s that are going back to work, after retiring. 

From a pension advice and financial point of view, Mr Jones is going to be in a far stronger position. By him delaying taking his pension (even for a few years) and due to his continuation of paying in to it, his eventual retirement income, fund value, and prospects will be considerably improved.

We can see that the benefits aren’t just financial. Social engagement, purposefulness and a feeling of self-esteem in your career are factors that can be mistakenly dismissed by people approaching retirement. This is another reason why people are choosing to return to work. These last points are referenced in psychology by the famous theorist Abraham Maslow. It is well worth looking up Maslow’s Hierarchy of Needs if you haven’t come across it already. 

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested. Transferring out of a final salary pension is unlikely to be in the best interest of most people.