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New Age UK research shows how the cost of living crisis is upending some people's retirement plans and their prospects of a comfortable standard of living in the years to come

By: Age UK
Published on 16 June 2023 11:01 PM

Age UK and the Pensions Policy Institute say that sadly, for some older workers, high inflation means that retiring early may turn out to have been costly

Age UK says there is more for Government to do to support people in their fifties and sixties who can work, to be able to do so

New modelling by the Pensions Policy Institute (PPI), published following a joint roundtable with Age UK on economic inactivity among older people[i], shows that many of those returning to the workforce after taking time out – as well as others in their 50s and early 60s who left work during or following the pandemic and who haven’t returned – could find that a comfortable standard of living in later life has moved further away from them. In some cases, sadly, a comfortable retirement may now be beyond their reach completely, as high inflation continues to wreak havoc on carefully laid retirement plans.

The PPI modelling shows that someone on the National Living wage would need to find £26,000 to support themselves at their usual standard of living if they left work for two years, and a higher earner may need around £60,000. Some people may take this money from their pension pot and reduce their later pot level. In addition, someone on the National Living Wage could miss out on around £6,000 of pension contributions.[ii]

Another factor is the need of some older people who are feeling the pinch to draw down their defined contribution (DC) private pension funds just to keep going financially now, thereby reducing the amount available to fund their retirements later on. The PPI paper shows that more DC pension pots are being accessed for the first time than previously, revealing a year-on-year rise of 18% – potentially having a significant impact on people’s retirement savings.

The ‘Great Un-Retirement’ appears to be in full swing, as the numbers of people who are out of the labour market despite not having reached their State Pension Age (SPA) have been reducing over the last year.  1.075 million people under the age of 65 are currently retired (Feb-April), down from a high of 1.196m nine months ago and 1.180 million this time last year.[iii] Age UK says that this strongly suggests that the cost of living crisis is forcing some people on the cusp of retirement to keep working and, in some cases beyond it, in order to make ends meet.

This impression is backed up by Opinium polling for Age UK, which earlier this year found that around 400,000 people approaching state pension age (9% of those aged 60-65), or another member of their household, had recently had to change their work habits, for example returning to work, working longer than expected or delaying retirement, in order to boost their income.[iv]

The Charity continues to hear from older people whose aspirations for their retirements are being ruined by the impact of inflation:

“Had to take early retirement May 2022 to help care for mother with dementia. Due to increases in fuel and all utilities I have been forced to get a part time job to supplement my work pension.”

“I have joint problems and I am a carer for my husband who needs to keep warm in winter. I have had to take a part time job to make ends meet.”

“The only time my family used the heating during last winter was at Christmas. I am working but my wages would not cover the cost of heating my house and leave enough to buy food and cover the other bills that are also rising. I am due to retire in September 2024 but unless there is a big change, I cannot see this being possible.”

The PPI and Age UK roundtable also discussed what needs to happen to support people in their fifties and sixties to be able to stay in employment in the run-up to their State Pension Age. With average healthy life expectancy in the UK standing at just 62.8 years for men and 63.6 for women[v], Age UK is worried that having to wait until 66 for the State Pension is already bringing great hardship and anxiety to many older people who would like to work but who can’t because of ill health, disability or caring responsibilities, particularly at a time when the cost of living is soaring. The Charity says they need more financial support so they can keep their heads above water, at a time when prices for most everyday items are rising fast due to inflation.

Age UK is also calling on the Government to seek to reduce economic inactivity among people in their fifties and sixties by developing policies that help those who are able to work into a job. Increasing access to flexible working and to training would make a real difference to these people’s ability to be in employment.

Caroline Abrahams, Charity Director at Age UK, said: “The cost of living crisis really is driving a coach and horses through many older people’s retirement plans, especially those without much money behind them. There’s growing evidence that some are having to postpone retirement because they don’t now have enough money coming in to pay the bills. Others who thought they could leave work for good and did so, partly in reaction to the pandemic, are having second thoughts and returning, but it’s usually too late for them to make up the shortfall in their pension contributions. Meanwhile, another group are really concerned about their ability to make ends meet today because of inflation but can’t work because they aren’t well enough, or are too disabled, or are caring for a loved one. It all boils down to the fact that hundreds of thousands of people in their fifties, sixties and beyond, who hoped and expected to be ok financially, definitely aren’t now, and are looking at the gloomy prospect of a less comfortable standard of living in future.  

“As the cost of living crisis continues to exact a heavy toll, we think the Government needs to provide more generous financial support for people who cannot keep working until they become eligible for their State Pension, as well as increasing access to training and flexible working for those who can, thereby reducing the level of economic inactivity, which is one of their big goals. Policies like these would make a big difference to this age group and help our economy too.”

John Adams, Senior Policy Analyst at PPI, said: “Modelling undertaken by the PPI for Age UK shows that when people leave work before their planned retirement age, they have to find money to replace their earnings income. Pulling money out of pension savings early could have serious consequences for retirement income, through pot reduction.

“Additionally, those leaving work generally cease making pension contributions and miss out on the value of those they and their employer might have made had they stayed in work, and any investment returns they could have accrued. For example, leaving work 2 years before the planned retirement date may require someone to find around £25,500 in order to meet the target replacement rate to replicate living standard of a person earning £18,500 a year, over that time plus an additional £3,000 to cover pension contributions foregone.”

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Last updated: Feb 05 2024

Notes to editors:

Age UK is a national charity that works with a network of partners, including Age Scotland, Age Cymru, Age NI and local Age UKs across England, to help everyone make the most of later life, whatever their circumstances.

In the UK, the Charity helps more than seven million older people each year by providing advice and support.  It also researches and campaigns on the issues that matter most to older people. Its work focuses on ensuring that older people: have enough money; enjoy life and feel well; receive high quality health and care; are comfortable, safe and secure at home; and feel valued and able to participate.

Age UK’s subsidiary charity, Age International, supports older people globally in over 30 developing countries by funding programmes such as vital emergency relief and healthcare and campaigning to raise awareness and change policies.

Age UK is a charitable company limited by guarantee and registered in England (registered charity number 1128267 and registered company number 6825798). Charitable services are provided through Age UK and commercial products are offered by the Charity’s Community Interest Company (CiC) (registered company number 1102972) which donates its net profits to Age UK (the Charity)


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Contact the Age UK Media team on 020 3033 1430 during office hours (Mon-Fri 08:30-17:30) or for out-of-hours media support please email 

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Age UK

We work with our national partners, Age Scotland, Age Cymru and Age NI and our local Age UK partners in England (together the Age UK Family). We also work internationally for people in later life as a member of the DEC and with our sister charity Help Age International.

Age UK believes that everyone should have the opportunity to make the most of later life, whatever their circumstances. We provide free information, advice and support to over six million people; commercial products and services to over one million customers; and research and campaign on the issues that matter to people in later life. Our work focuses on five key areas: money matters, health and well-being, home and care, work and training and leisure and lifestyle.

Age UK is a charitable company limited by guarantee and registered in England (registered charity number 1128267 and company number 6825798). Age Concern England and Help the Aged (both registered charities), and their trading and other associated companies merged on the 1st April 2009. Together they have formed the Age UK Group ("we"). Charitable services are offered through Age UK and commercial products are offered by the Charity's trading companies, which donate their net profits to Age UK (the Charity).

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