Until relatively recently, the question of your age of retirement could be met with a relatively straightforward answer. For more than half a century, the State Pension age was fixed at 65 for men and 60 for women, and these milestones were commonly regarded as an exit point from employment.

Today, not only is the State Pension subject to forthcoming changes, but the entire notion of retirement is being re-evaluated altogether. Reaching State Pension age is no longer regarded as the finishing-line on a full-time career, with many people taking a more flexible approach and considering how work and life can best be balanced in later years.

In this article, we look at the trend of semi-retirement, exploring its popularity among those approaching retirement and looking at some of the important financial considerations involved.

A changing world

One of the major drivers behind changing retirement attitudes is the simple fact that people are living longer. In 1911, three years after the State Pension was first introduced for those aged 70 and over, the average life expectancy at birth for a male was 51.5 years old and 55.4 for a female. A century later, these figures increased to 79 years old and 82.8 years old respectively.

The stark contrast in these figures highlights how ever-increasing numbers of people are living a larger proportion of their lives in retirement. In light of the current State Pension age of 66, it also accentuates just how much harder our pensions now have to work for us in later life.

Running counter to this point is the fact that increasing numbers of people closing in on retirement age are choosing to depart the workplace early. While the outbreak of pandemic has been cited as a major trigger for this exodus – with many people using it as an opportunity to reset their work-life balance – it has remained a feature of the post-Covid world.

Government data shows that 50-to-64-year-olds accounted for more than two thirds (68.5%) of the total rise in economic inactivity among working age adults between the three months to March 2020 and the three months to January 2023, and tackling this issue was a key feature of the Chancellor’s Spring Budget, where he introduced a variety of measures designed to encourage older workers back into employment.

Finding a happy medium

Making a return to work does not necessarily mean a return to the 9-to-5, however. Research from insurance giant Aviva has found growing appeal among ‘pre-retirees’ of blending access to private pension income (which is only accessible from the age of 55) with sustained income, at a potentially lower level, from working reduced hours. Indeed, two in five of those aged between 55 and 64 said they plan to ‘semi-retire’ before they reach the current State Pension age of 66, while semi-retirement holds even more appeal among 18-34-year-olds (59%) and those aged 35-44 (61%).

Also referred to as ‘partial retirement’ or ‘part-tirement’, this trend indicates how many people are planning to wind down their careers as they reach State Pension age. It is a plan that is likely to reap rewards if it comes to fruition, with the significant majority of people (91%) describing themselves as “much happier” since reducing their working hours.

However, further findings indicate that our view on employment can change with age. While only 41% of survey respondents said they liked the idea of working through retirement, for example, this figure is almost double (80%) among those aged 65 or older.

This demographic is more likely to have first-hand experience of retired life and, arguably, this experience reveals the financial realities of managing your finances through the prism of your pension. Particularly in the context of a cost-of-living crisis, many retirees have been challenged by the declining real-world value of their savings in the face of sustained inflation.

Turning the ambition of semi-retirement into a reality can therefore be seen to require careful forward planning. Individuals need to weigh up the expected shift in their lifestyle with the change to their income resulting from leaving full-time work.

It is a rebalancing act that could place greater pressure on the amount of savings you have available, making it essential that forethought is given to your financial stability as well as your lifestyle goals. Surprisingly, as many as a third of people (34%) say they don’t know how much retirement income they will want, hinting at the fact that the semi-retirement dream has the potential to turn sour if it is not accompanied by detailed planning.

For those who do get it right, semi-retirement has the potential to deliver a rare win-win situation where individuals can enjoy more leisure time with loved ones while maintaining a valuable stream of regular income, as well as the sense of purpose and achievement, that comes from keeping a foot on the career ladder.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.