Changes in household income over the past year may end up increasing 'retirement inequality' in the UK, new research suggests.
Legal & General Retail Retirement found that, as a result of the Covid-19 pandemic, some people are planning to retire earlier while others have been forced to delay their retirement.
Two in five people aged over 50 and not already retired (41%) have seen some impact on their career and retirement plans as a result of coronavirus, the research showed.
Among pre-retirees aged over 50 surveyed by Opinium Research for Legal & General, one in 10 (9%) have seemingly benefited and now expect to retire an average of two years earlier than they initially planned to. Research by the Bank of England in November last year found that, with household spending down due to lockdown and other restrictions, many people's savings had risen substantially since the start of the pandemic. The accumulation of savings was greatest for high-income households: 42% of high-income employed households were saving more during the pandemic, compared with 22% of low-income employed households.
Another 10% of pre-retiree over 50s expect to delay their retirement by an average of three years as a direct result of financial setbacks caused by the pandemic, and a further 20% anticipate they will need to continue working indefinitely as a consequence of Covid-19's impact.
Looking at the impact of the pandemic on people's household income, the retirement provider highlighted figures from the Office for National Statistics which show that unemployment among those aged 50-64 rose from 2.6% in April 2020 to 4.1% in December 2020. Further analysis of the data reveals that there are 429,000 unemployed over-50s in the UK, representing one in four (25%) of all unemployed people.
Over the past 12 months, a third of people aged over 50 and in work (34%) have seen their household income decrease due to Covid-19, by £500 per month on average. This is approximately 20% of a family's overall monthly spend of £2,537 and more than the average amount needed to cover all monthly bills, after rent or mortgage payments are made (£400).
This change in household finances has led many people to adjust their monthly retirement savings. Three in five workers aged over 50 (68%) said that the pandemic has had a direct impact on their retirement savings, with an equal split between those who are saving more towards their retirement and those who are saving less. Those saving more are putting an additional £335 a month away, while those saving less have had to reduce their retirement savings by £230 a month.
"A dramatic shift in household income can often mean that people need to make changes in what they prioritise, but for people in these all-important 'pre-retirement years' these changes can have particularly long-lasting repercussions, particularly for people who have stopped saving towards retirement," said Andrew Kail, chief executive of Legal & General Retail Retirement. "For over 50s worrying about their finances, it's important they have a clear understanding of what they have in their retirement pots and what other assets are on hand to boost their income at the point they retire, such as property wealth."