The midlifers forced to delay retirement

Legions of people in their 50s are realising they may have to scrap their dream of retiring early after the worst year in financial markets for a decade. Sam Meadows reports on the financial midlife crisis

More than a million people have been forced to delay retirement, as rising living costs cause a financial midlife crisis for many. Some 1.3m workers aged between 50 and 55 have delayed their retirement plans, around 670,000 of them by five years or more, according to research by Investec.

The investing firm said more than half of that age group reported being unhappy about the state of their finances, with four in 10 wishing they had saved more when they were younger.

Faye Church, a financial planner at the company, said that people in that age bracket were at a “particularly vulnerable point in their lives”. She added: “Financial health is important at all ages but particularly crucial as people enter their 50s and are heading for retirement as well as potentially facing other financial challenges such as supporting children through university or with a first home.”

It comes after the worst year in financial markets for more than a decade, as well as double-digit inflation and an energy bills crisis which has made it harder to save.

Among the legions of people realising that they may have to scrap their early retirement dreams is Alyson Colman (pictured, right), 55, a local government worker from Caerphilly, Glamorgan. She had planned to retire at 58, but now thinks she may have to wait until she is 64 because of the cost of living crisis. She has two pensions – one final salary and one private – but has also been saving into a separate account to help tide her over until her state pension payments begin. However, she said her household bills have increased by around £100 a month and she is now spending an extra £20 a week on food, making it impossible to save at the rate she needs to.

“I am very careful with money, but I’m not able to save as much as I was because the cost of everything has gone up,” she said. “I will get my state pension at 67 – that’s another 12 years away. It’s looking quite grim. I think the earliest I would be able to comfortably retire is 64.

“My husband is eight years older than me and I wanted to enjoy some quality time with him but that seems like a distant dream at the moment. It doesn’t feel realistic.”

She added that she regrets not having paid more attention to her finances at a younger age. “Understanding pensions is just so overwhelming, there is so much information to take in. I wish I had thought about it sooner,” she said.

Professor Sir Cary Cooper, a workplace psychologist, said that the events of the 15 years since the 2008 financial crisis had made people feel more insecure about their finances. He added: “That [unhappiness] is being driven by the lack of control and uncertainty people feel about their lives.

“We need to get younger generations to understand the importance of investing and the fact that it does give people more control over their lives. You can do things yourself if you are financially stronger.”

The number of people taking early retirement has risen, with 300,000 more 50 to 65-year-olds now “economically inactive” compared with before the pandemic.

The vast majority of those in their 50s who left their job during the pandemic said it happened earlier than expected, according to figures from the Office for National Statistics.

Meanwhile, in response to a shortage of workers, understood to be a factor in the cost of living crisis, the Government has announced plans to give older people who have left work a “midlife MOT” to entice them back into a job.

But you do not have to wait for the Government and it is never too late to assess your own finances.

The first thing to do is to review your

‘That unhappiness is being driven by the lack of control people feel about their lives’

outgoings. Cutting spending could allow you to save more and retire earlier. Review subscriptions and direct debits and cut any that are not being used.

Switching car, home or life insurers could also cut bills. Investec’s Church pointed out that life cover that was taken out alongside a mortgage may no longer be needed if the debt has been paid down, although she stressed you should check carefully what you are giving up before ending a policy.

Make sure you are saving in a taxefficient way. Pensions attract tax relief at your marginal rate, meaning they are a more cost-effective way to put money away. But you may have to wait for longer to access the money.

Interest rates have risen recently, meaning a competitive market for cash saving accounts. Anyone with a good amount of cash stored away should make sure they are taking advantage.

Ms Church said you should also consider investing some money held in cash, although how great a proportion and how much risk an individual should take would depend on how long they have to wait until retirement.

Ms Church said savers in their 50s should also check their state pension record for gaps. Many older people, particularly women who spent time out of work earlier in life, have gaps in their record which will mean they are not entitled to a full state pension.

It is possible to make a voluntary payment to fill any gaps in your record and the annual payments after state pension age could mean you can use more of your savings in the years before retirement.