Unretirement and financial wellbeing

Changes in the way we approach work, pensions and retirement have a range of implications for reward and financial wellbeing strategies. Importantly, retirement is increasingly flexible, and less likely to be a one-way route. Workforces can benefit greatly when employers take a diverse approach.

Mat Zimmerman, Market Development Manager

The concept of retirement has been taking a new shape in the UK. An employee’s retirement age is usually a target they can set for themselves, rather than a date determined by their employer. That might be earlier than the State Pension age, which is gradually increasing to 68, so some people could be working longer than they would like. However, Pension Freedoms has given people more flexibility to bridge the gap in income. Changing trends in employment also impact the way people approach retirement, and we’re seeing self-employment and contracting becoming more popular.

Of particular interest, is the concept of ‘unretirement.’ Around one in four retirees in the UK return to work or ‘unretire’, mostly within five years of retiring, according to research by The University of Manchester and King’s College London.1

The research showed a number of factors increasing the likelihood of a retiree returning to work. Unsurprisingly, good health is a factor, as is having a partner still in work. Men were 26 per cent more likely to unretire than women. There are financial imperatives too, and those with an outstanding mortgage balance were 50 per cent more likely to unretire than those owning their homes outright. However, the authors of the research suggest that higher amounts of human capital are more closely linked to the likelihood of unretiring than financial difficulty, and those with post-secondary qualifications were twice as likely to unretire than those without.

This may be interesting to recruiters and hiring managers who are looking to bring more experience to a role or more diverse backgrounds to a team. It also has implications for HR and reward managers. For example, one key rule returners and their employers should know about is the money purchase annual allowance. Once you’ve accessed your pension benefits flexibly, even a small amount, the most you can then pay into a pension in one year, without incurring a tax penalty, is £4,000 – low enough to impact people on modest incomes.

So, while a generous pension scheme may be useful in attracting and supporting the financial wellbeing of the majority of employees, there can be segments in a workforce where a different approach to reward, perhaps a wider range of savings options, may be more appropriate.

If your company places importance on financial wellbeing in the workplace – and there’s significant evidence of the business benefits in doing so – it pays to take a diverse approach. There’s already a strong case for this, as we’ve discussed before at Scottish Widows.

It’s also important to recognise that unretirement is mainly going to be an option for those who’ve retired before they absolutely have to. Incomes of retired households are as high as they’ve ever been2 and much of this will be driven by current retirees benefiting from generous final salary pensions. Future generations may not be as well off as they approach retirement, especially those who started work a little too late for final salary pensions, and a little too soon to fully benefit from automatic enrolment. Our recent survey showed that one in five people in the UK now expect to work until they are physically unable to.3

This just makes the case for a diverse financial wellbeing strategy even stronger. A workforce could include people returning after trying early retirement; it might include people seriously under-saving so they can’t see themselves being able to retire, and a whole range of other scenarios.

There’s a lot of support available to employers. Some may come at a cost, but this won’t always be the case, especially where there’s already a relationship with a pension provider or adviser. It’s worth employers asking their existing partners what support they can offer to support a diverse workforce.


Platts et al, 2018

ONS, 2017

Scottish Widows Retirement Survey (PDF, 294KB) , 2018

Information correct as at May 2018

Unretirement and financial wellbeing | Employer | Scottish Widows