As UK inflation hits a new 40-year high of 10.1%, and workers face a record slump in “real wages”, millions of older people are putting their retirement plans on hold or pausing their pension savings – putting their future finances at risk – while hundreds of thousands of retirees are being driven back to work to make ends meet.

Official figures show that a record 173,000 more over 65s went back into employment in the three months to June. This will come as no surprise to those struggling to make ends meet: those relying on the State Pension saw their income rise by a measly 3.1% in the Spring, a full 7% less than the rate of inflation.

Those in work have fared only slightly better: after taking account of inflation, average pay has fallen by 4.1 per cent in real terms over the last year – the biggest decline in records going back to 2001.

More pain could be in the pipeline: The Bank of England expects inflation to top 13 per cent in October, with those on smaller incomes hardest hit because of the disproportionate impact of energy and food costs, which are rising above average inflation. Energy bills are forecast to climb above £4,000 a year next year, potentially around half of some older people relying on a State Pension, while supermarket prices are piling on a further £500 a year or more to household spending.

Age UK director Caroline Abrahams has warned of dire consequences for many as the colder weather coincides with rising inflation unless there is a big injection of additional support from the Government. “If this doesn’t happen our sincere belief is that we could see unprecedented numbers of older people dying of cold in their own homes, something we would never say lightly and that is incredibly shocking in the 21st century.

The drive to unretire

The cost-of-living crisis has forced huge numbers of older people to reverse their retirement plans, following a major exodus from the workforce during the pandemic when an estimated 1.2 million “Boomers” (aged between 58 and 75) left work, according to a new report from Dunstan Thomas.

The report also identifies the growing trend for many in the lead up to retirement to push out their planned retirement age: some 31 per cent of the 1,272 Boomers reached in the study wanted to work on beyond State Pension age (currently set at 66) for an average of 4.3 years – taking their estimated age of “full retirement” to 70.3 years. Some four per cent questioned made it clear they never planned to stop full-time work.

Concerns over “pension pausing”

New research from Canada Life shows that the cost-of-living crunch in the UK has led to 5% of adults stopping contributions into their company pension, while a further 6% say they are “actively thinking” about pausing contributions and a further 9% might consider doing so in the future.

Depending on the age of the saver, that could make a significant impact on the pension pot they will ultimately accrue. If, for example, they paused at age 40, Canada Life’s modeling based on someone earning £50,000 and saving 8% of salary shows they would have built a pension worth £386,999 at age 67 but missing one year’s contributions would reduce that to £371,318 – a difference of £15,681.

What does all this mean for anyone in or approaching retirement?

So are you currently on track to enjoy a comfortable retirement… or will you need to keep working for longer than you had planned?

You might want to ensure that your plans are on track by using the RetireEasy LifePlan online program. In just a few minutes, and for just a few pounds per month, you can see in simple-chart form just how long your savings and investments will last when you decide to leave the workplace.

What’s more, using the Premium version, you can run different scenarios to see what would happen if you adjust those plans – by leaving earlier or later, downsizing, taking out a lifetime mortgage or by including or reducing what you are currently saving. Click here to find out more…

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Don’t get caught out by the cost-of-living crisis. Put yourself in control of your future finances with the RetireEasy LifePlan.