The traditional view of work and retirement often assumes starting a job for life, retiring at 65, and a fifteen-year retirement. However, in today’s world – where people typically have multiple careers over their lifetime and increasingly live into their 90s – this model has become somewhat outdated.

For starters, the current State Pension Age is 66 (set to rise to 67 by 2028). If you can afford to retire earlier, the Normal Minimum Pension Age (NMPA), which is the earliest age most people can access their pensions without tax charges, is currently 55 (rising to 57 by 2028).

According to the latest life expectancy data from the (ONS), men and women aged 55 to 67 can expect to live until ages 84 to 88 on average, and more than 1 in 4 will live into their 90s.

So, your retirement could span 20 or 30 years and there’s a good chance it could last up to 40.

Your pension may need to last considerably longer than you planned, but can you afford it? Read on to discover the emotional and financial benefits of delaying your retirement.

Delaying your retirement could considerably boost your pension

Delaying your retirement by even a single year can significantly enhance your pension pot.

In the latter stage of your working life, you might find that you’re earning the highest salary of your career, meaning you can make larger contributions to your pension. Additionally, staying in work longer reduces the number of years you’ll rely on your pension, helping your savings stretch further.

For example, Pensions Age reports that a 60-year-old with a modest pension of £200,000, could expect to receive a retirement income of around £4,900 a year. Yet, if they deferred their retirement for one year and continued to make pension contributions of £200 a month, their pot could grow to £211,000 (assuming growth of 4.25%).

With one less year of retirement to spread the fund over, this could provide an income of around £5,700 a year, which is 16% higher than if they retired at 60.

Delaying your retirement also gives you the option to defer your State Pension.

For retirees reaching State Pension Age after April 2016, your State Pension increases by 1% for every nine weeks you defer, equivalent to approximately £2.20 a week in 2024/25. Deferring for a full year provides an extra 5.8%, adding around £12.83 a week.

However, since deferring means you’ll receive your State Pension for a shorter overall period, the financial benefit will depend on factors like your life expectancy and income. Speak to a financial planner to work out whether deferral aligns with your long-term financial needs.

Delaying your retirement could also be beneficial for your mental wellbeing

Delaying your retirement could also offer emotional benefits, especially if you reach the State Pension Age or NMPA and still feel fully capable and fulfilled in your work.

For many, a job provides more than just a pay cheque. It can shape your sense of purpose, structure, and even identity. Moreover, work often brings social connections and a feeling of belonging to a team, and there may be significant aspects of your working life that you miss after retiring.

According to ONS data, 46% of people aged 50 to 65 who left or lost their jobs during the pandemic due to physical or mental health issues expressed a desire to return to work. Their primary reasons included enjoying the work itself and seeking social interaction.

Furthermore, 42% believed that returning to work would have a positive impact on their wellbeing, which speaks to the close connection between work and mental health.

So, with retirement likely to last considerably longer than it once did, delaying could give you a greater sense of fulfilment and purpose in the latter years of your career.

A financial planner can help you determine if delaying retirement is right for you

While the emotional considerations of delaying retirement are personal for you and your family, a financial planner can work with you to determine whether it is the right choice financially.

Using cashflow modelling, they can project what your finances might look like in the years ahead. By analysing factors such as your income, assets, and expenses, along with variables like retirement age, inflation, life expectancy, and investment growth, they can help you gain a clearer picture of your financial future.

A financial planner can then help you develop a tailored strategy that accounts for your pension, ongoing contributions, and long-term retirement goals.

To speak to a financial planner, get in touch.

Email info@blueskyifas.co.uk or call us on 01189 876655.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.