Recession delays retirement plans for 1.85 million people

The effects of the economic downturn on pension pots have forced more than a third of people over 55 to put off their retirement plans and continue working, according to MGM Advantage.

The shocking new figures from the retirement income specialist, which form part of its second annual Retirement Nation Survey, suggest that 35 per cent of over 55s who are still at work - around 1.85 million people - are now resigned to working longer than anticipated in order to replenish their pension pots while waiting for the stock market to deliver better returns.

And MGM Advantage says that 23 per cent of over 55s have resolved to work beyond the State retirement age of 65 with no final retirement plan in mind after seeing their pension funds decimated by the credit crunch and subsequent recession.

The slump in the value of stocks and shares since the credit crunch has left many people with defined contribution pension schemes facing massively reduced pension pots. In March the FTSE 100 fell to its lowest level for more than six years.

MGM Advantage says a huge proportion of people approaching retirement are simply not prepared for life after work and do not realise the possible scale of the drop in income they might experience. The firm's research suggests that 32 per cent of over 55s are ‘not prepared at all' for retirement with a further 35 per cent admitting to having done nothing whatsoever to prepare for life after work.

Craig Fazzini-Jones, Director at MGM Advantage comments, "One of the most worrying consequences of the economic turmoil is the knock-on effect for those approaching retirement. Millions of people nearing the end of their working life have been forced to slog it out for a few more years to see if their pension pots will make any kind of recovery. For many it is not a choice, but a necessity.

"It is hugely concerning that so many people are so unprepared for retirement. There is a definite need for those approaching retirement age to make the most of their pension pots and one of the best ways to do this is to compare the market for the best deal when it comes to converting your pot into annual income."

Official figures suggest that more and more people are being forced to work beyond retirement. In 1994 the retired population earned around £14.4 billion a year from working but that figure has since risen to an estimated £26 billion - an increase of 79 per cent.

Many over 55s who are not already retired are being forced to seek income from other sources in order to prop up their decimated pension pots. The MGM Advantage figures show that nearly one in ten (9.3%) are considering releasing some of the equity from their properties either by downsizing or by taking out equity release schemes.

However the recession hasn't affected everyone. 48 per cent of over 55s who have not retired say the recession has not changed their financial planning for retirement, while 13 per cent say they are saving more to mitigate against possible losses elsewhere.

Craig Fazzini-Jones added: "If you are approaching retirement you have to balance living for now with how you want to live in the future. No other financial decision you will ever make effectively asks you to choose how you want to lead your life for the next 30 years, so it's a big one to get wrong. Anyone with huge pension deficits must be wondering whether to hold fire before retiring in case things start to improve, or whether to cut their losses."