A good friend, a man I’ve known for more than three decades, retired last autumn at the age of 55. Over a beer several years ago, he admitted that he had grown to despise his job.
“Why don’t you just leave?” I asked, rather naively. As his shoulders visibly slumped, he sighed. “Because,” he said, resignedly, “the pension is too good. I’d never be able to match it anywhere else.”
His pension may have appeared attractive, but the prospect of receiving it would keep him anchored in an unhappy, unfulfilling role for another decade. Last October, his employer asked him to remain for another year, but he was having none of it. He took the money and ran, initially to Mexico with his wife for a longish holiday, before returning home to, well, not much actually.
I spoke with him recently. He’s anxious to return to the world of work, but tells me he’s received only a handful of replies to the dozens of CVs he’s distributed, so self employment is the way forward.
It transpires that this radical change of plan is the result of a disheartening realisation that his post-tax pension income is not quite as generous as he believed it would be.
My friend’s tale is similar to that which many folks will encounter as they enthusiastically, at least initially, enter the early stages of retirement, and explains why so many people in their late fifties and sixties are becoming their own boss.
There has been a phenomenal surge in self-employment. According to figures released by the Office for National Statistics (ONS) last month there are 700,000  more self-employed people than there were in 2008, a rise of almost 18 percent.
Yet this astonishing increase is not all attributable to a rebirth of entrepreneurial spirit, evident across Britain since the mid-17th century, but more recently undermined by the dead hand of the state.
Granted, the comparative uncertainty of employment, coupled with the attractive, if esoteric appeal of working for yourself has undoubtedly prompted many to echo the words of the marvellously-named Johnny Paycheck and advise their employer that they may “Take this job and shove it – I ain’t workin’ here no more”.
Others, however, have fallen into self-employment out of necessity, in much the same way as people who cannot sell their homes become landlords by default. In both instances, the ‘least worst’ option is pursued, probably until something better turns up. Realistically, however, this is an unlikely scenario for someone in their sixties.
Significantly, Britons are increasingly realistic enough to accept that they’re
likely to work well beyond the official retirement age.
Perhaps the government’s message is finally getting through. A study commissioned by pension minister Steve Webb last year warned that the pension gap, ie the difference between what you need and what you actually receive in retirement, was widening. Mr Webb suggested that up to 13 million of us face an austere retirement after not saving enough during our working lives. Those capable of doing so will, therefore, have to continue working, although it’s worth pointing out that millions will do this out of choice, especially when the alternative is so depressing: daytime television featuring Jeremy Kyle.
More recently, an HSBC-commissioned a report revealed that almost 40 percent of Britons confirmed that they had either made no financial plan, or were inadequately prepared for anything approaching a comfortable retirement. One third of those who admitted this said they only realised how under-prepared they were after they retired.
Statistics published by the ONS suggest that the number of people aged between 65 and 74 who were now ‘economically active’ had doubled during the last decade. There are many reasons why this should be so, including
the best of all: keeping going keeps you going.
The rise in self-employment, irrespective of why people start working for themselves, is to be welcomed. However, there are millions of soon-to-retire folks who would like the option of working, possibly for themselves, if they wanted, but many
would also like to slow down a little too, without feeling as though they had
to work.
It follows that individuals wishing to keep their options open should plan for their retirement as early as possible, so avoiding the realisation that they haven’t saved enough and find themselves forced into becoming an entrepreneur by default.