Will You Be Forced into an Untimely Retirement?

Every year, people are forced to retire earlier than expected due to circumstances beyond their control.
For the first time in UK history, there are more than 10 million people aged over 50 in employment (Office for National Statistics, UK labour market: January 2019). And with more people living longer and the State Pension age rising, the number of older workers is expected to keep growing.
But every year, people are forced out of work much earlier than they expected. According to new research from Just Group, nearly six in ten adults aged between 50-65 said they were forced to retire by events outside of their control, such as redundancy or ill-health (Just Group, February 2019).
“Being forced to stop work is difficult for anyone, but can be especially difficult for those over 50,” says Stephen Lowe, group communications director at Just Group. “Unemployment also means people cannot bank their regular income into a pension and may even be tempted to dip into existing retirement savings.”
The research also shows that twice as many women were forced into retirement to care for a family member than men. Women were also one third more likely to retire early due to illness. Just one in five were able to choose to leave the workforce for positive financial reasons.
“The findings highlight the strain that providing care for family members can place upon households who are either entering residential care or require some other form of professional help – with the result that many people are forced into giving up their own jobs or careers early to provide the necessary support,” says Lowe.
Change of Direction
If you are faced with an unplanned retirement, how should you go about dealing with it? It’s all too easy to make costly mistakes, but there are in fact a number of important steps you can make to manage the change.
The first is to decide whether you actually want to retire. If you’re unable to work because of ill-health, you may not have a choice. But redundancy can often throw up new opportunities, including the chance to retrain for a new career. 
Adding to your existing skills or gaining new qualifications are good ways of improving your chances of getting another job. Indeed, many people return energised and refreshed for a fulfilling new phase of employment after leaving behind a career of many years. 
You may need to look at your current budget and figure out which expenses you can cut until you’re able to regroup financially. You may also need to consider when and how to begin tapping into any savings you have. If you’re not able to claim your State Pension yet, you may need to look into alternative options.
If you are stopping work due to ill-health, you may be able to get access to a final salary pension earlier than 65. Each pension scheme has its own definition of ill-health, but usually it means you can’t do your normal job because you’re physically or mentally ill.
You can usually dip into a defined contribution pension from age 55. But you should work with a financial adviser to create a withdrawal strategy that helps your assets last longer. You should also try to avoid selling your investments at an inopportune time. Note that from a tax perspective, it typically makes more sense to withdraw from assets that are liable for Inheritance Tax, such as ISAs, first.
If you are seeking a long-term guaranteed income from your pension savings, bear in mind that many annuity providers are prepared to offer more income if you have a medical condition, so it’s worth considering this option if you are eligible.
If you are disabled or have a health condition, make sure you claim everything you could be entitled to. For example, Personal Independence Payment. You should also check whether there’s any support you can claim to replace your lost earnings if you have little or no pension income – for example, Employment and Support Allowance.
You could apply for Carer’s Allowance if you care for someone for at least 35 hours a week and for each week you get Carer’s Allowance you’ll automatically get National Insurance credits.
Finally, if you are happy to consider taking redundancy, make sure you weigh up all the pros and cons. One advantage might be the redundancy pay, but you should find out exactly how much you would get and whether you would need to pay tax on it.
Don’t Leave It to Chance
Retirement has the advantage of being one of the few times when we can freely rearrange our lifestyle and its priorities. Spending more time with family, learning a new skill or travelling can define an entirely new way of life. But sometimes, it arrives before we are financially ready.
If you’re still a long way from retirement, start by asking yourself, “What can I do now to prepare for a day when I can no longer work?”. While you can never be certain whether you’ll need to retire early, you can do your best to prepare today by creating a financial plan. To be effective, that plan should consider potential unexpected events and the possible actions that can be taken to mitigate them.
To receive a complimentary guide covering Retirement Planning, Wealth Management or Inheritance Tax Planning, please contact Pardeep Singh Narwal of Narwal Wealth Management Ltd on 0116 242 6777 or email [email protected]
(The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances).