Interest in flexible retirement is on the rise across Ireland, with almost seven in 10 (69%) financial advisors reporting increasing interest from clients over the past 12 months.

A survey of 130 financial advisors nationwide undertaken by Independent Trustee Company (ITC) found that 14% of respondents described the rise in interest in flexible retirement as significant.

Flexible retirement is a step-down retirement model whereby people transition into retirement by reducing hours and drawing on a pension as they approach retirement age.

“Flexible retirement, also known as ‘semi-retirement’, is a relatively new workplace trend which, as our research suggests, is likely to gather pace in the coming years," said Glenn Gaughran, head of business development with ITC.

"Flexible retirement essentially allows an employee to reduce their working hours or take on a less senior position in the run-up to retirement, so they have more time to pursue hobbies and interests, spend with or care for family, volunteer or even retrain,"

A fifth (19%) of advisors said the increase in interest has only been seen amongst wealthy clients, and 10% said that while they haven’t seen the uptick as yet, they expect interest in flexible retirement to pick up over the next year or two.

Just over one in five (21%) have not noticed any growth in popularity, according to the survey.

"It's clear that flexible retirement is becoming a preferred route for many clients looking to ease into their next life stage without sacrificing financial security," said Gaughran.

"Advisors are seeing more people looking for a middle ground between full-time work and full retirement. The ability to tap into pension savings while scaling back work is resonating, especially among those who want to maintain lifestyle stability without burning out.

"Interestingly, even those advisers who haven’t yet seen a rise in demand anticipate it’s only a matter of time before demand picks up. This points to a shift in expectations around what retirement can and should look like.

"While not possible in every job, where it is an option flexible retirement can be hugely beneficial. Benefits can include a better quality of life, improved health, less stress and the ability to work for longer than would have been the case if the individual continued to work full-time.

"With some employees, the reduced working hours that come with flexible retirement can even lead to better productivity. Flexible retirement can also help people to be more prepared for and transition to full retirement.”

Gaughran also offered five tips for those considering flexible retirement.

1. Check that it’s financially feasible Given the reduced working hours, flexible retirement typically means a drop in income and so it is not always financially feasible for people. Having an old or supplementary pension in the wings could make flexible-retirement financially possible, depending on how well resourced the pension is and whether it can be tapped into in order to supplement an individual’s reduced income.
2. Check how early you can access money in your pension scheme It may be possible to access money in a pension from the age of 50 without fully retiring, depending on the type of pension and the rules of the scheme. If you have an old occupational pension scheme, you can usually start to draw down money from it once you reach the age of 50 – as long as you’re no longer working with the employer who provided that scheme. If you have the likes of a Personal Retirement Savings Account (PRSA), active occupational benefits or personal pensions, as long as you wait until the age of 60, you can ‘retire’ and draw down from those pensions - and continue working without having to actually retire.
3. Be mindful of the tax implications In flexible retirement, you’ll be likely supplementing your reduced income with money from a pension. Taking money from your pension at the same time as earning money through employment could affect the rate you pay income tax at by moving you into a higher tax band. Be mindful too that the amount of tax relief that you can get on pension contributions is not just restricted by your age but also your total earnings so you may not be able to get as much tax relief on pension contributions in flexible retirement as you had become accustomed to, particularly if there is a significant drop in your income. Know where you stand on your tax-free lump sum too. If you opt for flexible retirement and take a tax-free lump sum from an old pension when you’re in your Fifties, any future tax-free lump sum that you draw down would need to take the previous lump sum drawn down into account.
4. Be mindful of the impact on your overall retirement income The pension you receive from an old pension scheme will likely be lower if you opt for flexible retirement than if you continued working until normal retirement age as there will be less time for the funds accumulated to benefit from any investment growth. Being on lower earnings could also impact your ability to fund any pension you continue to contribute to in semi-retirement as you won’t have as much disposable income as you previously would.

5. Be mindful of longevity If you live into your 90s (or later), you might regret accessing money in one of your pensions early on as you might run out of money before you die – particularly if your other pension investments don’t perform as well as you’d hoped. Another thing you need to be mindful of is the substantial medical and nursing home fees that might arise in your senior years – and your ability to fund these in the future if you opt for flexible retirement.

"The job-for-life is largely a thing of the past so it’s not unusual for workers today to have a pension or two from previous jobs, in addition to the pension they are saving into with their current employer," said Gaughran.

"This means that it may be more financially feasible for people to take up the option of flexible retirement today than would have been the case in the past as they could have an old or supplementary pension to tap into.

"Flexible retirement however is not a decision that should be taken lightly. It’s important to fully understand the impact of flexible retirement on your income when you fully retire and on your ability to have a comfortable standard of living at that stage of your life."

(Pic: Getty Images)