A growing number of retirees are returning to work as the financial realities of retirement fall short of expectations, according to new research from Standard Life.

The data suggests one in six retirees (16%) have either already gone back into employment or are considering doing so, with 8% having returned and a further 8% weighing up the option.

While some are choosing to re-enter the workforce for social reasons, the findings point to financial strain as a key driver. Nearly a third (30%) of retirees say their standard of living has worsened since retiring, compared with 22% who say it has improved.

Social factors are also playing a role, with almost a quarter (24%) saying they feel lonely or disconnected when not working, underlining a shift in how retirement is perceived.

RETIREMENT EXPECTATIONS FALL SHORT

The research highlights a lack of preparation among many retirees. One in five (20%) said they underestimated how much money they would need, while 21% wished they had planned more thoroughly. A similar proportion (19%) said they had not fully considered how long retirement would last.

Inflation has compounded these challenges. Standard Life’s analysis shows that £100 in 2020 is now worth £78.25 in real terms, significantly eroding spending power over a relatively short period.

Those retiring before state pension age, or without defined benefit pensions that include inflation protection, are particularly exposed. Maintaining income in later life is therefore becoming more complex and, in some cases, requires taking on greater investment risk.

Recent data from the Department for Work and Pensions shows the proportion of over-65s with earnings has been rising, a trend closely linked to the period of higher inflation. Ongoing geopolitical tensions are also expected to keep cost pressures in focus.

SHIFT TOWARDS FLEXIBLE RETIREMENT

Expectations around retirement continue to evolve, with fewer people viewing it as a fixed point at which work stops entirely. Instead, there has been a long-term shift towards more flexible arrangements, including part-time roles and phased retirement.

This trend, which has been developing since the early 2000s, saw a temporary reversal during the pandemic when many older workers exited the workforce earlier than planned. However, since 2021/22, participation has begun to rise again, suggesting a return to the longer-term pattern.

Despite this shift, barriers remain. While 78% of respondents believe they could still do their job at age 60, confidence falls to 49% by age 70. Health concerns were cited by 39%, while 26% pointed to the need to retrain and 24% raised concerns about age discrimination.

Looking ahead, uncertainty persists, with more than a third (38%) expecting their retirement lifestyle to be worse than their current one. This rises to 49% among Gen X and 43% among women.

Mike Ambery, retirement savings director at Standard Life plc, said: “Retirement is no longer a single moment where work simply stops. For many people it’s becoming a more flexible journey, shaped around the life they want to live, and more flexible approaches to work – including part-time roles and phased retirement – are making it easier for people to stay in the workforce for longer and shape work around their changing needs later in life.

“For some, returning to work is about staying active and connected. But for others, it reflects the reality that retirement isn’t always turning out as expected, particularly as rising costs put pressure on incomes.

“In a world that feels increasingly uncertain and unpredictable, it’s more important than ever that people feel supported to engage with their financial futures and understand what their retirement could look like.

“Simple steps can make a real difference, whether that’s before or during retirement – from regularly checking in on your pension savings and thinking about how you’ll use them to generate an income, to reviewing how much you’re taking and whether it’s likely to last for the years ahead.

“It’s also important to check when you’re due to retire, as your planned retirement date and your State Pension age don’t always align, and to make sure you’ve planned for any gap between the two.

“Taking time to consider the kind of lifestyle you want, exploring phased or flexible retirement options, and seeking guidance early can help people make more informed decisions. Planning ahead means people are better placed to manage their money with confidence and achieve greater financial security over the long term.”