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6 Jan 2022

What do you need to do to retire early?

One in four people want to retire at 60, according to a new survey
A group of pensioners enjoying life on the beach

60 is the most popular age to retire early according to new research - but if you've got this target age in mind, you will need to plan ahead.

Although the state pension age is 66, research by insurance firm Aviva found that one in four people are planning to retire at 60. While an even more ambitious target of 55 has been set by 20% of those looking to retire early.

We've rounded up the best ways you can make that dream a reality.

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Why do people want to retire early?

Enjoying more freedom while still being physically fit and well enough to enjoy it was the most popular reason people gave in the survey of 2,000 people across the UK who are planning or have taken early retirement.

Financial security was the second most common factor with 26% of early retirees saying they could afford not to work.

Other factors include reassessing priorities and what is important to them in life, and wishing to spend more time with family.

The reason given for early retirementPercentage of people
Enjoying more freedom32%
Financial security26%
Reassessing priorities23%
Spending more time with family20%
Becoming 'tired' or 'bored' of working19%
Finding work too stressful19%

Source: Aviva pensions survey from December 2021.

Retiring early: happiness vs cost

Early retirees said they were happier, had better relationships with friends and family, and had improved mental and physical wellbeing.

However, 47% of these people said their finances had worsened as a result.

Women were more likely to have found this - 50% vs 44% of men retiring early.

Only 22% of people said they had benefited financially from the decision to give up work early.

How people retired early

One in three early retirees said having a defined benefit pension was the main reason they were able to retire early.

A defined benefit pension - sometimes called a final salary or career average pension - is one that promises to pay out an income based on how much you earn when you retire.

Unlike defined contribution (DC) pensions, the amount you'll get at retirement is guaranteed, and it will be paid directly to you.

This could mean that the dream of early retirement may get harder for younger generations, with the majority of the private sector workforce now saving into defined contribution schemes.

Paying off a mortgage was the second most common stepping stone to early retirement followed by saving little and often.

The main measures enabling people to retire early or think about itPercentage of people
Having a defined benefit pension32%
Paying off mortgage30%
Saving little and often29%
Saving extra with a pay rise or bonus19%
Receiving a redundancy payout16%
Receiving an inheritance14%

Source: Aviva pensions survey from December 2021.

Find out how much you need to retire

Many people overestimate how much they need for retirement as people tend to want to match their current salary even though they will have fewer outgoings to cover when they get older. For example, many would have paid off their mortgage or have grown-up kids that have moved out.

Every year we speak to thousands of retired Which? members, both those living alone and couples, to see where their money is spent.

Our latest survey found households with one person spent an average of £19,000 a year and households with two people spent an average of £26,000 a year. This covers all the basic areas of expenditure and some luxuries, such as European holidays, hobbies and eating out.

So the level of income you need in retirement might be less than you thought, but you will need to make sure your pension savings are on track to hit the target.

Your state pension will form a major part of your income in retirement but you will need to wait until you reach state pension age to access it and it's likely you will need pension savings to build on the income it can provide.

For example, our research found a couple who had reached state pension wanting an income of £26,000 would likely get £16,120 in state pension payments, so the remaining amount would need to be covered by a private and/or workplace pension. That would require a pot of around £155,000 alongside their state pension to help reach the target via pension drawdown - or just over £265,000 through a joint-life annuity.

If you wanted to retire before you reached state pension age you would need significantly more in pension savings, to help fill the gap before the state pension kicks in.

Gareth Shaw, Head of Money at Which? has called on the Government to introduce the pensions dashboard and simplify annual benefits statements swiftly, so people can understand how much they have saved and what it is worth in retirement.

He said: 'The pandemic will have caused people to rethink their retirement plans and even consider retiring early, but many do not have access to the clear and accessible information they need to help them plan.

'Our research shows that most people will need to be putting away significant sums if they want to ensure they can enjoy a comfortable retirement, andearlyretirees must be wary of increasingly sophisticated pension scams offering high returns on investments.'

Top tips to boost your pension

Opt into a workplace pension

Since 2012 employers have had to enroll their staff into workplace pension schemes as part of a government initiative to get people to save more for retirement.

The minimum total contribution under auto-enrolment is 8%. The employee pays 5% of this and the employer must pay the remaining 3%.

Increase your contributions

Some employers match your contributions. So if you can increase them, even just by 1%, it could make a huge difference to your overall pot - especially if you start early.

However, you can also pay a lump sum into your pension so consider this if you receive a windfall such as a pay rise or inheritance.

As with all pension contributions, you'll benefit from tax relief up to a total of £40,000 a year.

Consider a lifetime ISA

If your earnings or way of working means you don't qualify for auto-enrolment but you have money to save you could try a lifetime Isa.

The lifetime Isais a tax-free savings or investments account designed to help those aged 18-39 at the time of opening to buy their first home or save for retirement.

For every £4 you save, the government will add £1 up to a maximum of £1,000 every tax year until you turn 50 years old.

However, you should bear in mind that you only gain the 25% bonus on top of what you save until the age of 50, but you cannot access your funds until you reach 60.

You can withdraw money at any time - though if you do before you turn 60 the government will take 25% of the total amount you withdraw as a penalty.

Track down lost pension pots

If you've lost track of a pension from a previous job, you can use the government's Pension Tracing Service, which has a register of all workplace schemes.

This will give you the name and contact details of the provider of your employer's scheme so you can contact them directly.


This article has been updated to make it clearer about how to reach a retirement income goal of £26,000 with the state pension and pension savings.