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COVID-19 is affecting retirement plans

Senior couple having breakfast and doing bills

The pandemic is already affecting people’s retirement plans, according to the Institute for Fiscal Studies (IFS).

One in eight older workers (13%) have already changed their planned retirement age as a result of the coronavirus pandemic, according to the Institute for Fiscal Studies.

A later retirement is now the plan for around 8%, most commonly those with a pension fund that has fallen in value, and those working from home.

Meanwhile, 5% plan to retire earlier than planned. This is more common among richer households and those on furlough.

These are just some of the findings of a briefing note published in September 2020 by the IFS. The ELSA COVID-19 study data used in this research is funded by the Economic and Social Research Council (ESRC) as part of UKRI’s rapid response to COVID-19.

Older people’s finances

Another key finding was that not all older people have the wealth to help them weather income shocks. Among those whose income had fallen since the outbreak of the pandemic, 23% had net wealth of less than £500 per person. A number of people borrowed money: 4% borrowed from a bank and 5% borrowed from family members.

Heidi Karjalainen, a Research Economist at IFS, said:

The personal finances of many older adults are being hit by the fallout from the coronavirus pandemic. While many have wealth to help them smooth income shocks, this is by no means true of all.

Older adults are also more exposed to financial hits to their pension saving, because being closer to retirement there is less time for fund values to recover before they might want to start drawing on their wealth.

The analysis draws on new data from the English Longitudinal Study of Ageing (ELSA) COVID-19 study. This specially-conducted survey, made possible with funding from ESRC, the US National Institute of Aging and a consortium of UK government departments, interviewed adults in their 50s and older from June 2020 to July 2020.

Last updated: 17 November 2020

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