Covid-19 sees a surge in early retirement

The number of people retiring before the age of 65 rose by more than 55,000 as the UK went into lockdown, official data reveals, suggesting that Covid-19 may be driving an increase in early retirement.

The Office for National Statistics (ONS) said that in the March to May period of this year, the number of under-65s describing themselves as “retired” was 55,311 up on November 2019 to January 2020.

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But many people may have been forced into early retirement unexpectedly because of problems in the labour market caused by Covid-19.

For example, older workers losing their jobs may have decided it was unlikely they would find a new role. For those planning for early retirement, the change of lifestyle may have been very welcome.

But retiring early can prove expensive, reducing the amount of time for savings to grow and requiring people to fund pension income for longer.

Research published by Prudential has suggested that people quitting the work force early face an average reduction in their annual retirement income of £3,400.

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David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.