While a period of, for example, a year away from work could lead to a short-term savings pause, ultimately staying in work for longer due to greater fulfilment earlier in life could prove lucrative. Standard Life’s Retirement Voice 2024 research found that on average, Brits currently hope to retire at the age of 62, six years earlier than the expected State Pension age for someone retiring after the period 2044-2046.1 At the same time, Phoenix Insights found that people in the UK tend to have a more negative perception of work than their international peers. Were a more fluid approach to work and retirement to change attitudes and encourage people to stay in employment for six years longer, Standard Life’s analysis shows that savers could build up an additional £42,000.
Standard Life calculations find that those who begin working aged 22 on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions (5% employee, 3% employer) from the age of 22, could build up a total retirement fund of £163,000 by the age of 62, adjusted for inflation. Taking a 12-month micro-retirement at the age of 30 and retiring at 62 could lead to a pot £4,000 smaller, however someone who took a one-year ‘micro-retirement’ at the age of 30, but then worked until the age of 68, could retire with a pot of £205,000 in today’s prices, £42,000 more.
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group said: “Taking a ‘micro-retirement’ might mean a temporary pause in pension contributions, however the trend offers a unique opportunity for your ‘proper retirement’ savings as well as shorter-term personal wellbeing. We know that people who feel fulfilled and happy tend to stay in work for longer, so taking time out and returning to your working life refreshed and motivated could extend your career and leave you with a larger pot.
“As you tend to be at your peak earning potential later in your career, saving for a few extra years just before retirement could have a disproportionately positive impact. There’s a good chance people will be living longer in future and so retiring a few years later, with a bigger pension, could give you a better chance of ensuring your savings last as long as you need them to.
“Ultimately, the micro-retirement trend reflects a broader shift towards greater flexibility and work-life balance, and an acknowledgement that in future our lives are likely to be more fluid than the traditional education, then earning, then retirement structure. With the right support and planning, it could lead to a more sustainable working life, while still enabling financial security in retirement.”
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