If the thought of clocking out of work on a Friday and never working again fills you with unease, you’re not alone.

People’s expectations of retirement have changed dramatically over the past couple of decades. Our research1 of 1,500 people found that many expect their retirement to be gradual as opposed to a ‘cliff-edge’ where they suddenly stop working altogether.

This change of approach has been partly enabled by changes to the way people can access their pension pots. Pensions are a lot more flexible than they were in the past, which means retirees can fund their retirement in a way that suits their individual needs – whether that’s via a guaranteed, fixed income or a more flexible income that gives their money the opportunity to keep growing. 

With that flexibility comes more responsibility to save and plan for the future, although our research suggests people need more support in getting started. 

In this series of three articles, we’ll discuss what our research findings mean for you. 

Retirement is no longer a cliff-edge

Whereas retirement used to involve a complete and abrupt break from work, many of today’s pre-retirees intend to keep working in some capacity in later life. 

Our survey found that of those who hadn’t yet retired, only 24% said they will retire on a specific date and completely stop. Most were planning a more gradual retirement, with 27% intending to reduce their hours at their existing job, 21% ‘mostly’ stopping work on a specific date and 14% taking a different job.

Which of the following best describes how your retirement will happen?

The pie chart shows survey respondents’ answers to the question, ‘Which of the following best describes how your retirement will happen?’ The yellow section makes up 27% of the pie and is the proportion of respondents who answered, ‘Gradually by reducing my hours at my existing job.’ The light green section represents the 24% who answered, ‘On a specific date and completely stop.’ The dark green section depicts the 21% who said, ‘On a specific date and mostly stop’ and the grey section depicts the 14% who answered, ‘Gradually by leaving my job and taking a different job.’ Overall, the pie chart shows that 76% of respondents aim to retire gradually rather than stop work completely on one specific date.

The motives for retiring gradually were a mix of financial and social reasons. For example, 33% said they don’t feel ready to completely retire, 27% said ‘to top up my income’ and 24% cited social reasons.

Retiring is about emotional and financial readiness

More broadly, the research found that retiring is as much about emotional readiness as it is about financial readiness.

As part of the research, we conducted interviews2 with nearly 70 consumers. Some said retirement would be possible when they have enough money or their big financial commitments have all been met. Others said they would retire when they’ve ‘had enough with work’ or feel ‘pushed out’. Some were more conflicted – they want to work and want the money, but they don’t want to be working when they’re ‘too old’. 

Retiring gradually is one way of balancing these emotional and financial triggers. Research participants said gradual retirement provides a sense of purpose and social interaction. It might be lower paid, but it’s less stressful and offers more control and independence. It can also help financially by alleviating the need to draw on pension savings and plugging the gap before the state pension kicks in.

Could you retire gradually?

Of course, not everyone wants to – or is able to – retire gradually. You might be counting down the days until you retire, working in a profession or 9-to-5 role that doesn’t support a gradual retirement or suffering from ill-health. 

These are perhaps some of the reasons why semi-retirement doesn’t happen as often as might be expected. The survey found that of those who had already retired, only 38% retired gradually. That’s significantly lower than the 62% of non-retired people who plan to retire gradually. 

While some factors may be outside your control, the way you draw income in retirement is down to you. The key is to understand your options in advance, so you can plan accordingly. These days, there are several retirement income options to choose from and some of these will be better suited to a gradual retirement than others. 

With flexible income drawdown, you can take up to 25% of your pension as tax-free cash (capped at £268,275) and leave the rest invested. You can then draw the income you need and change this amount whenever you want to. So, if you retire gradually, you could start off by drawing a small income to top up your salary and then increase this when you stop work completely.

This differs to an annuity, which provides a guaranteed, fixed income. Annuities provide more certainty, but you can’t increase or decrease the income to suit your needs. Another option is to take a series of individual lump sums, where 25% of each lump sum is tax-free and 75% is taxable. 

It’s also possible to use a combination of options, which adds further flexibility. Find out more about income drawdown, annuities and taking a mix and match approach. 

In the meantime, look out for our second article in this series. We’ll discuss how to plan for the retirement you want, even when the future is uncertain.

Vanguard commissioned Boring Money to survey 1,500 savers and investors aged 50 to 70 in January 2024. Survey participants had at least £75,000 in workplace or private pensions, or if they couldn’t provide a pension value, a minimum income of £30,000 (retired) or £40,000 (non-retired).

We spoke to 67 participants aged 50 to 71 who had workplace or private pensions and a minimum of £10,000 in investable assets.

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