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Is early retirement on the rise in the UK?

By Hugh Fort in News Stories, posted April 18, 2023

Since the COVID-19 pandemic, the UK has been struggling with labour shortages as older workers have not returned to work.

This rising trend is a cause for concern during the cost-of-living crisis and it’s thought that it could fuel wage growth and increase inflation.

The move to early retirement could be attributed to changing priorities and preferences after the years of the pandemic. The absence of financial incentives encouraging higher earners to work for longer also may be responsible.

Here is a quick run-through about the trend of early retirement and what its impact is in the future:

What is research showing?

Government estimates suggest that around 630,000 people have left the workforce since 2019 and employment figures have not bounced back to where they were before the pandemic.

Research identifies reasons for this exodus, including increased savings during the pandemic and the UK’s pensions flexibilities.

The furlough scheme successfully allowed the country to avert a mass unemployed crisis, but it also allowed some people to experiment with life outside of work.

These over-50s are typically more well-off and do not want or intend to ever return to the labour market. This has left a significant gap in the labour market and means that businesses must pay more for a workforce, which is then reflected back in consumer products.

How is retirement being funded?

Early retirement is being funded in a variety of ways. Investments and pension plans are typically the primary methods.

Investing in tangible assets like static caravans and holiday homes for sale is a great way to provide a consistent, stable income. This in turn can fund all manner of lifestyles and can be easily maintained, eliminating the need for regular work. Other opportunities like government bonds also help individuals diversify their investment portfolios.

Downsizing or moving abroad has also been a popular move for retirees. Moving into a smaller property can free up equity and some extra cash. The allure of overseas property is understandable as the quality of life is typically higher due to lower energy and property prices, along with everyday necessity prices.

Will the trend be reversed?

The cost-of-living crisis is likely to have caused those over 50 to rethink early retirement as they experience significant financial pressures. The Institute for Fiscal Studies has identified that the skyrocketing inflation rate was the likely reason why more 50 to 64-year-olds were now looking for work.

It is too early to say whether the trend will be reversed but the government intends to include measures that will encourage more early retirees back into the labour market.