We often talk about retirement being a gradual process with people winding down from work in their late 50s and early 60s. But just how easy, in the current economic climate, is it to do that without looking for a new job or changing career?
For many workers over 50, flexible working is the ideal – whether to accommodate caring responsibilities, manage your own health issues, or simply achieve a better work life balance in the run-up to retirement.
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About one in three (32%) of over-50s in employment work part-time, according to Office for National Statistics figures - a relatively stable number over the last eight years, bar a dip during the pandemic. But the Flexible After Fifty report, from the 50+ Choices Roundtable, highlights that many more, nearly three-quarters (72%), want flexible work for better work life balance but aren’t sure how to go about it.
Although flexible working laws were introduced over 20 years ago, they were originally focused on parents of young children. They are now widely accepted in most workplaces. Yet the same can’t always be said for workers aged 50+, even though the demand for flexibility is higher in this age group than any other in the workforce, according to the Centre for Ageing Better.
Tracy Riddell, senior programme manager for age-friendly employment at the centre, says: “Employers, in general, have not yet developed the policies and structured 'ways of working' that supports ‘flexible retirement’. Surveys have shown that employees over the age of 55 are the least likely to have their boss discuss flexible working options with them.”
So how do you negotiate going part-time successfully at this stage of your career? There’s more of an art to it than you might think. Career coach and psychologist Dina Grishin says: “When you pitch your case, what you’re really doing is answering the question: what are the benefits to the company, my manager, and my team of having less of me at work? Obviously, be careful not to sell them on that notion too well!”
All employees have a statutory right to request flexible working which, since April 2024, has been a day one right.
Tina Chandler, head of employment law at Wright Hassall explains that: “You have the right to make two formal requests within a 12-month period, covering arrangements such as change of work location, compressed hours, reduced hours, job-sharing, or staggered start and finish times.”
Under the new rules, you aren’t required to explain the impact of your request on the business or how this might be mitigated. “However, adding your views on this can assist your employer in considering your request, and consequently of your request being accepted,” Chandler adds.
Employers are not obliged to grant every request, but they can only refuse on statutory business grounds. These include extra costs to the business, impact on customer demand, work reorganisation, recruitment issues, reduced quality or performance, insufficient work, or planned structural changes.
Research by the Phoenix Group, shows that within the first year of the new rules, one in five workers’ requests were rejected for business reasons. Acas, the advice, arbitration and conciliation service, offers flexible-working guidance, including request letter templates, and runs a helpline 0300 123 1100.
Career coach Hannah Salton suggests starting by reviewing your company's policies on part-time or flexible working, so you know your options. She says: “Be clear about what you want before speaking to your manager and explain your reasons calmly and objectively.
"Emphasise the benefits, such as improved focus, engagement, and productivity. If your request is not immediately approved, try to understand the reasons and see if there’s room for compromise. Stay pro-active, open, and aim to keep the conversation going to get you closer to where you want to be.”
There will, of course, be company cost-saving benefits to reducing your hours. But think beyond that, says Dina Grishin. “Could this phased reduction help prepare your team for your eventual retirement, giving them time to build confidence and skills while you’re still around to support them? Could stepping back open opportunities for other team members to step up? Might your role shift towards coaching or knowledge-sharing, spreading knowledge more evenly across the team?” she suggests.
Her advice: “Make it easy for your manager to say “yes”. That means anticipating problems and offering solutions in your proposal.”
However, before you put your pitch to your employer, it’s also important to think about your motivations and check that it won’t undermine your future security.
Sheena Doherty, senior wealth management consultant at Sovereign Wealth, says: “Think about why you are making the decision. Is it for work life balance? Are you feeling overwhelmed with working full-time? Or are you looking for the flexibility of still having an income and a purpose, without being reliant on that income.”
Here are some key financial issues to consider before making a decision.
“Start by getting a clear understanding of your committed expenditure. What do you need to earn a month to meet this? Has the mortgage been repaid?” Doherty suggests.
You might hope to be debt-free by retirement, but Interactive Investor’s Great British Retirement survey shows that 36% of 56–65-year-olds still carry unsecured debt. “If you’re planning more holidays or leisure activities with your extra time, factor those costs in, too”, she adds.
Check whether reduction in earnings will affect your national insurance contributions and therefore your state pension entitlement. Clare Moffat, pensions and tax expert at Royal London, says: “Contributions aren’t affected by a reduction in salary unless the part-time income reduces to below £6,500 a year.”
Use the government’s online checker to confirm you’re on track. Also review whether tax credits, universal credit, or other benefits might change on a lower income.
It’s also important to think about the impact going part-time could have on your workplace pension. Moffat says: “Pension contributions are calculated as a percentage of your salary, so lowering your income also decreases the contributions made by both you and your employer. This could make a real difference to the quality of life you have in retirement, particularly if your pension pot is small.”
Figures supplied by Royal London show that someone earning £45,000 full-time, who drops to £20,000 part-time at the age of 50, could see their pension pot shrink by around £63,154 by the time they full retire at age 67. (Assuming pension contributions of 8%, salary growth of 2.5% per year and 5% annual investment growth)
As you can access defined contribution pensions from the age of 55 (rising to age 57 from 2028), you may be able to use your pension to top-up your part-time earnings. However, while this might ease pressure on your pension if you’re working beyond retirement age, it could have a detrimental impact on your long-term finances if you are going part-time while you’re still in your late 50s or early 60s.
This could exacerbate the risk of running out of money, too soon, or being forced to get by on lower income later in retirement.
Moffat also points out that once you have made a taxable withdrawal from your pension it will also reduce the amount you are able to contribute going forward, which can be problematic if you’re still earning.
“If you take more than just tax-free cash from a defined contribution pension, you’ll trigger the money purchase annual allowance, which caps contributions to £10,000 a year. If you want to pay more than this in pension contributions, then think about phasing and taking only tax-free cash,” she explains.
Sheena Doherty says: “With people living longer than ever, the pre-retirement years and flexi-retirement can be exciting and fulfilling times,” so, “planning not to run out of money is probably the biggest financial question to consider when thinking about reducing your working hours.”
That means seeking independent financial advice could be a sensible option, especially if you’re starting the retirement wind-down particularly early, or you will need to call on your pension to top up your income and pay the bills.
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