Forget the warnings about having to work until you drop – new research has found the dream of early retirement is still alive and well.
A survey, by provider of long-term savings and pensions Prudential, has found the majority (58 per cent) of those planning to retire this year – the Class of 2016 – are doing so earlier than their State Pension age or company pension retirement date.
Each year Prudential carries out research into the finances and aspirations of people planning to retire in the year ahead.
This is the ninth annual edition of the unique research, it is however the first time the study has taken a detailed look at the characteristics that early retirees have in common.
Many appear to be willing to take a hit on their annual retirement income in exchange for giving up work early. The average expected retirement income for people retiring early is £16,800 – this compares with £19,000 for those who are not planning to do so.
Interestingly, the members of the Class of 2016 who are planning to retire early seem to be more savvy about their preparations for retirement.
For example, they are far more likely to have a saved into a pension – just 10 per cent say they have no pension savings, compared with 20 per cent of those who aren’t retiring early.
Early retirees are also likely to have consulted a professional financial adviser more recently – on average they last saw an adviser two years and nine months ago, compared with three years and 10 months for those who are not retiring early.
Those taking early retirement in 2016 are also better informed about the ongoing changes to pensions legislation. They are more likely to have changed their plans based on the pension freedoms (27 per cent versus 15 per cent) and more of them are aware of the new flat rate State Pension that will come into effect this April (70 per cent vs 55 per cent).
Prudential also found that the type of pension scheme people belong to appears to be a significant factor in determining whether they retire early.
Perhaps unsurprisingly, more than half (51 per cent) of 2016’s early retirees have the majority of their retirement savings in a final salary scheme, compared with only 38 per cent of those who aren’t planning to retire early.
Vince Smith-Hughes, a retirement income expert at Prudential, said: “We’re seeing expected retirement incomes take a long time to recover to their pre-financial crisis levels, so it is striking to see that many people retiring this year are stopping work early. We hear a lot about future generations having to work until they drop, which is of course a little over the top. But as fewer people over time benefit from generous final salary pensions, it will mean that anyone looking to retire early needs to prepare well in advance.
“There are valuable lessons to be learned from this year’s early retirees, and the main characteristic they demonstrate is being financially well-prepared. The Government’s free and impartial Pension Wise guidance service can help more people make the right decisions in the run up to retirement.
“While saving as much as possible as early possible into a pension scheme is a good start for most looking to secure a comfortable retirement, we also found that those able to retire early are more likely to have recently taken financial advice. A professional financial adviser can help people understand what steps are necessary to achieve their specific retirement goals.”
Those retiring early are more likely to feel financially well prepared (59 per cent) than those who plan to wait until their retirement date (51 per cent). Meanwhile, across the UK, London has the highest proportion of people retiring early this year, with more than two-thirds (67 per cent) planning to do so.