Two fifths (40 per cent) of over 55s who anticipated gradually moving into retirement in the next five years now worry that the rising cost of living could throw this into jeopardy, research from Legal & General (L&G) has revealed.

The survey found that more than a third (34 per cent) of over 55s still working in some form have already started phasing into retirement by reducing their hours and responsibilities, representing 3.3 million pre-retirees.

L&G highlighted the research as reinforcement of the idea that retirement is "no longer a line in the sand", noting that almost half (48 per cent) of employees over 55 expect to take a phased approach to retirement, rather than completely stopping.

Additionally, a further one in seven (14 per cent) pre-retirees said that they were planning to wind down in the next year.

However, the main reason that respondents had made the decision to continue to work was affordability, with 44 per cent of respondents stating that they simply cannot afford to retire.

On average, L&G found that over half (54 per cent) of all people who are taking a phased approach to retirement are working 15 or more hours less every month, consequently earning £9,150 less every year.

As a result, more than a third (38 per cent) expect to have to adjust their lifestyle, while a further 17 per cent even anticipate struggling to meet the cost of household essentials.

In addition to this, although 37 per cent wanted to keep their job but lessen their stress, the research found that cost of living has had an impact, with one in 10 people who had begun to phase into retirement having to increase their work commitments again.

Furthermore, two fifths (40 per cent) of people who anticipated gradually moving into retirement in the next five years now worry that the rising cost of living could throw this into jeopardy.

However, analysis from L&G suggested that the average income on an average pension pot of £73,000 for a fixed term annuity taken out by someone aged 55 is £9,000 per year, which could bridge the £9,150 income gap caused by a phased approach to retirement.

L&G Retail managing director of retail retirement, Lorna Shah, stated: “The number of pre-retirees considering a gradual or phased move into full retirement shows how much the perception of later life has changed in recent years.

"However people choose to approach retirement, it’s important they see it as something that should be actively managed, and not something they already feel they are ‘in’ or have ‘done’.

“For those wanting to keep their options open, while also looking for ways to supplement their income, flexible products such as fixed term annuities can play an important role.

"They provide a guaranteed income for a set time – in some cases as little as three years, helping to bridge any potential gap in salary.

“Most people find it challenging to navigate retirement at the best of times. With the increased pressures applied by the cost-of-living crisis, their money must go further than it ever has done.

"Ultimately, the key thing is to make sure people are making well informed decisions about what works best for them.”


This article first appeared on our sister title, Pensions Age.

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