The need for sound financial advice in turbulent times

As the cost-of-living crisis worsens, more retirees are returning to work – what can be done, asks pensions expert Andrew Megson.

Jar with coins in it and a sticker on it saying pensions


Not a day goes by without a new assortment of rather bleak, concerning statistics hitting the headlines regarding the cost-of-living crisis.

By now, we are all no doubt well aware of the situation as it stands, not to mention the threats that loom on the horizon. Inflation has hit 9.4% in the UK and is expected to climb to as much as 13% by the end of 2022.

Energy prices will rise sharply this autumn and into the New Year. People across the UK are understandably concerned. This is particularly true of those nearing or in retirement – the thought of no longer earning money at a time when the cost-of-living increases exponentially is a daunting one.

The Bank of England’s decision to hike the base rate six consecutive times, bringing it from a record-low 0.1% in December last year to 1.75% today, will offer some respite. But the performance of people’s savings will still be over-shadowed by sky-high inflation – the result is diminishing spending power, and pension pots will not stretch as far as they previously would have.

The culmination of economic trends is leading to an increasingly prominent occurrence: unretirement. That is, someone who had retired having to re-enter the workforce.

The rise of ‘unretirement’

Let us put this issue into context. In August 2022, My Pension Expert commissioned an independent study among 1,254 UK adults aged 40 and above. We found that 7% had ‘unretired’ in the first seven months of 2022 due to the cost-of-living crisis.

As noted, inflation is eroding the relative value of people’s savings. For retirees, the thousands of pounds they have tucked away simply will not stretch as far as they had imagined – for some, it will not cover the bare essentials. Evidently, millions have wasted little time in deciding to return to work and top up their savings.

Indeed, of those in retirement, our survey found that 34% will not be able to sustain their desired lifestyle in retirement due to the cost-of-living crisis.

However, unretirement should not be limited to those who are returning to the workforce. For me, this group ought to include those who had planned to retire but have had to delay this decision due to financial reasons. And here, the data becomes more worrying still.

More than a fifth (21%) of over-40s currently in employment said they had delayed their expected retirement date due to the cost-of-living crisis. This was more common among women (23%) than it was among men (18%).

Meanwhile, as many as 37% of workers over 40 stated that they consider retirement to be an impossibility for the “foreseeable future”. Again, the issue is more pronounced among women (41%) than it is among men (34%).

Clearly, these are hard times. But what can be done?

The importance of advice

It is only natural that harsh economic conditions will prompt people into more drastic action. For some, they will choose to reverse or delay their retirement decisions; for others, it is a matter of changing one’s pension strategy to alter its performance or how the savings can be used. Some will, of course, do both.

My Pension Expert’s research found that 7% of over-40s in the UK have switched pension providers or plans in 2022 to help their savings and investments hold their value against inflation. Two thirds (67%) said their pensions or retirement pots are losing value in real terms right now – so, we should expect more people to pursue alternative pension products or investments in the months to come.

This is understandable. Inaction or burying one’s head in the sand is always dangerous where personal finances are concerned, not least in the face of economic headwinds like those we are facing at present. However, crucially, when revising a pension strategy, action should only be taken after having sought out formal advice.

Worryingly, very few people are speaking to financial advisers, even in such turbulent economic conditions. A mere 13% of over-40s still in work have spoken to an adviser about their retirement finances in 2022. And women are less likely to have done so than men (11% versus 15%).

Those approaching retirement ought to seek independent financial advice before making a decision regarding investments or retirement finance products. An adviser will be able to assess the entirety of their financial situation and make the appropriate recommendations to help them achieve their desired retirement outcome without hindering their current situation.

Sadly, the ‘pension advice gap’ is a well-established issue in the UK; many people believe financial advice is too expensive, only for those with large investment portfolios, or they are deterred by excessive jargon. In truth, advice is accessible, and its value in terms of what it will mean for the performance of a person’s pension can often far outweigh the amount they pay for the advice.

Moreover, the best advisors are always able to put matters in a clear, uncomplicated manner, ensuring no one feels misled, alienated, or confused.

I would urge anyone who is worried about the performance of their pension or who is nervous about their retirement prospects in the current climate to seek advice. It is more important than ever at this time, and it could help people seek the financially secure retirement that their decades of hard work deserves.

*Andrew Megson is the executive chairman of My Pension Expert, an advised retirement income specialist. Founded in 2010, My Pension Expert specialises in providing independent advice to UK consumers about their pension plans – it arranges millions of pounds worth of retirement income options each week.

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