Almost a fifth of people aged 50 and over say that the Covid-19 pandemic has already or may impact their retirement plans, according to a new study from Co-op Insurance.

Of these, a quarter said they’ve not been able to retire due to their finances, a fifth have had to use some of their retirement savings after being out of work and a tenth have retired sooner than planned due to being made redundant during the pandemic.

Matt Lewis chartered financial planner (CFP) at EQ Investors says: “Markets continue to be choppy and for those investors with a UK bias in their pension fund (or a default holding) they will need to review. The FTSE 100 has not had the same recovery as the US which could see pension funds lower.

“The knock-on effect is the value of the ‘pot’ being considered for retirement no longer being able to provide a level of income they would be comfortable with. For those in their 50s who have yet to put adequate funds in place, they could therefore be looking at working longer than expected. This comes at a time when the furlough scheme has yet to finish and the potential impact to business, resulting in redundancies.

“For those who have already been drawing down on their pension they will need to be mindful of whether their income withdrawals will have an adverse effect on their pot. Drawing income during periods of distress will cause ‘pound cost ravaging’ further causing pension issues.”

Retire sooner?

Meanwhile, the study reveals that the pandemic has encouraged almost a third of people aged 50 and over yet to retire to do so sooner.

Of those people over the age of 50 who have retired, almost a quarter said the disease has affected their plans to spend time with friends and family and a fifth have not been able to travel as they’d planned.

When looking at how this impact on retirement plans has made people aged 50 and over feel, almost half have realised how important friends and family are, over two fifths say they feel annoyed and over a quarter think they need to make up for lost time.

Graham Ward Lush, head of life insurance at the Co-op said: “It’s perhaps no surprise that so many people over the age of 50 are disappointed with how the pandemic has affected their retirement plans, with so many envisaging more of this time being spent with friends and family.

“It’s encouraging to hear though that despite this situation being frustrating and disappointing for so many, the majority of people are now planning to make up for lost time.”

What can the over 50s do to improve their retirement plans?

Toby Band, head of global advice, at Arlo International  says: “There are two main ways to improve a retirement plan, with the first being to look at reducing costs of the pension or other investments. Most modern pensions have competitive fees, generally under 1% all-in for default corporate schemes. However, older corporate defined contributions have extremely high costs which can be as high as 3%.

“Anyone who hasn’t had a professional review in recent years should make sure to understand their charges by speaking with a regulated financial adviser, who can sift through the multitude of costs. The Transparency Task Force (TTF) found in 2016 that investment and pension schemes levy up to 300 hidden costs and charges. The difference can be huge. For example, if someone invests £100,000 for 25 years at 6% growth, the pot will grow to £430,000, however, £100,000 invested with the same growth rate but with 2% costs per year, will leave someone with £260,000 – a difference of £170,000.

“The second method is to ensure investments are correctly aligned to an individual’s risk profile, capacity for loss, timeframes, and specific retirement plan. Some people may be healthy, enjoy work, and want to retire at 75, which is one example of where ensuring the pensions are correctly aligned to their personal plans is critical.

“A 55-year-old wanting to retire at 75 is not the same as a 55-year-old wanting to retire at 65, as they have an additional 10 years of growth available and less time in retirement until death. Additionally, they are also more likely to need a contingency plan in case their health deteriorates beforehand. A professional adviser is trained to review individual circumstances, risk attitudes, capacity for loss, and can identify improvements to be made.”

Further reading

Most over 50s don’t budget says SunLife Finances

What has been the impact of Covid-19 on income drawdown sustainability?

Better access to impartial pension guidance needed says Just Group