This seems to be supported by statistical data. The best I could find are from the Office for National Statistics Labour Force Survey from 2012. They show that as many as 16.7% of men retiring in the period were below the age of 60, which was five years below their state pension age. Women retiring then had a lower state pension age than men - 60 compared to 65 - and the figures show that 8% of women retired below age 55.
We can speculate how they managed it. More generous, ‘final salary’ pension probably played a part, enabling people to spend other savings to support themselves in early retirement in the knowledge that a chunky, guaranteed, income was coming in a few years.
Buy-to-let property was certainly a factor for many early-retirees. From the late-90s onwards, buy-to-let provided a new, high-performing investment and income stream, and many took advantage of it. Even those of ordinary means could use equity built up in their home to buy mortgaged rental properties, and very quickly replicate their earned income through rents.
At the same time, rapid house price growth was creating small fortunes in just a few short years for anyone with multiple properties.
Perhaps another reason was more the generous pay-offs from employers. This is harder to pin-point but it is certainly true that public sector exit payments for early redundancy were significantly more generous than they are now, and available to workers beyond just the very highest earners.
According to commentary from international legal firm Osborne Clarke, public sector exit deals were often worked out on the basis of four week’s pay per year of service, possibly with a redundancy payment worth an additional 24 month’s pay. On the basis of that, a public sector worker aged 55 with 25 years of service under their belt would be able to leave with a payment worth almost four years of salary.
In each of these areas, employees today have it harder than their predecessors. Final salary schemes are fast becoming a thing of the past while tax changes have significantly raised the barrier to buy-to-let investing. After years of austerity and sub-par economic growth, generous ‘golden goodbye’ deals are far rarer too.
And all this seems to be making us more pessimistic about the chance of retiring early. Fidelity recently conducted some research into the attitudes of savers, the results of which will soon be published, and the findings show that only a tiny fraction of people now believe they will be able to retire early.
Asked to pick the age they think they’ll be able to retire, just 4% said they expected to be retired by age 65, the current state pension age, never mind five years earlier than that. This compares to 14% who say they think they won’t retire until past age 70.
It’s a gloomy picture for anyone who ranks stopping work among their financial priorities - but there are steps to take to improve your chances.
Pension freedoms meant that retirement savings can be put to use many years before traditional retirement ages but you’ll need the money in place to do it. Starting to save into a pension as early as possible is vital to give your money the time it needs to grow. Maximising the help on offer from tax relief and employer contributions comes next, before increasing what you pay in, either to your company scheme or via a self-invested personal pension (SIPP), where you’ll have more control over your investments.
While the task of retiring early has got harder, it isn’t impossible.
Please note the Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.pensionwise.gov.uk or over the telephone on 0800 138 3944.
Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge.
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The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Eligibility to invest into a pension and the value of tax savings depends on personal circumstances and all tax rules may change. You will not normally be able to access money held in a pension till the age of 55.This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.