Retirement? FORGET IT
Why many in their 50s fear the Covid crash will force them to work up to 10 years longer
THOUSANDS of over-50s have had their dreams of giving up work dashed after the Covid- 19 crisis wrecked their retirement plans.
Many say they can no longer afford to stop working because the value of their pension savings has plummeted. Others have had to suspend pension contributions after their income was hit by lockdown and they can’t now build up the nest- egg they need.
Half of investors admit having a ‘pension black hole’ and fear their savings will no longer give them the income they need in retirement, according to a study by Fidelity. To plug this gap, many say they will have to continue working full or part-time.
A separate report by Legal & General claims one person in six aged over 50 and in work thinks they will delay retirement by an average of three years because of the pandemic, with one in ten expecting to spend an extra five years or more in work.
Businesswoman Nanda Marchant, 58, is in the latter camp. She had been looking forward to starting a phased retirement in just a few months’ time but now expects this to be delayed for six or seven years. Nanda, who lives in the Midlands, and her husband Tony Hodgson, 60, wanted to gradually spend less time working, reaching full retirement in about three years.
But Nanda’s income dried up when her research business was forced to shut in March. Her husband is no longer earning either, leaving their plans — and finances — in tatters.
She says: ‘My business was going well and I could take on as many projects as I wanted. Tony sold his pricing consultancy business in December and had planned to do consultancy work.
‘But finding work for both of us is now looking very difficult.’
Nanda’s business, Added Insight, is a research company which runs focus groups and interview sessions. She is unsure when she can take on projects again.
As well as her loss of earnings, the value of Nanda’s pension pot, which is invested in the stock market, has fallen.
‘At one point I had lost 20 pc of my money but now the loss is in single percentage points. But this will need to recover before I can think of slowing my work and phasing in retirement.’ The selfemployed are among those hit hardest, according to the financial services company Aegon.
Some 40 pc of self- employed workers have been forced to rethink their retirement plans, with 22 pc now expecting to delay.
This is the case for self-employed Jude Hough, 47, who was planning to stop working at 55.
She estimates retirement is now at least ten years away because of the impact of lockdown.
Jude spent her life savings buying a lingerie shop in the market town of Alcester, Warwickshire, at the end of last year. Monthly sales at the shop were around £30,000. Jude quickly set up a website at the start of lockdown — lindaroselingerie.shop — but so far it has brought in less than £5,000 of online orders.
‘I had grand plans to retire. But I have just lost a huge amount of income, taken on £10,000 of debt through the bounce-back loan scheme and my pension savings have taken a beating,’ she says.
‘Now I’m now in a very poor position and can’t see any sign of retirement on the horizon.’
Jude has shrewdly saved in pension schemes since she was 21 and recently consolidated all the pots she had accrued, which will take time to recover.
Recently retired David Thompson, 63, saw his pension savings fall by 50 pc in the recent stock market crash.
He finished his banking job in February and was looking forward to retirement. But he is now searching for work again as he has a pension black hole — much of his money was in oil stocks, which have plummeted in value as demand and the oil price collapsed.
David, who lives in Edinburgh, says: ‘I retired at the beginning of this year with no idea of what was around the corner. I planned to live abroad for six months with six months in the UK. But that’s not looking likely now.’
According to the Office for National Statistics, the number of workers aged over 65 is already at a record high of 1.42 million. If people change their retirement plans in response to the pandemic, this number could soar even higher.
Although stock markets in general have since partially recovered, widespread declines have hit pension savings.
This is a bigger worry for those close to retirement who don’t have much time to make up big losses and may now want to leave their pension untouched for longer to give it time to recover further. Ross MacNish, financial planner at wealth manager Brewin Dolphin, says: ‘You can stay invested for longer, rather than turning on the income taps, and put more into your pension while you are still earning. Assuming markets recover, you could find yourself in a better position in a few years.
‘Lockdown has had a big impact on people’s normal spending habits and shortterm plans, so it may be a good time to consider what you will require when it has ended and what that means for your retirement. Set out a range of scenarios and you may find you can reduce what you think you need.’ Maike Currie, investment director at Fidelity International, says: ‘If you decide to defer your desired retirement age and work for longer, it’s important to update your pension provider about your plans — particularly if you’re a member of its default investment option, where your investments are automatically selected.’
This is because most firms automatically begin moving your money into safer investments such as cash as you approach your retirement. If they don’t know you have postponed your retirement, the investments will be de-risked too early and you could miss out.