Attitudes towards work have changed over time and research shows that UK adults place less importance on their careers than their peers in other countries. Research from King’s College London surveyed people in 24 different countries and asked questions about work-life balance. Only 22% of people in the UK agreed that “work should always come first, even if it means less leisure time”. Additionally, the percentage of people who believe it would be positive if less importance was placed on work has risen from 26% in 1981 to 43% in 2022. This changing perception of work could explain the new trend of “micro retirements” – taking short breaks throughout your career.
Read on to learn how this could improve your work-life balance and potentially boost your retirement pot.
A micro retirement could help you improve your work-life balance and achieve important goals earlier in life
The fast pace of modern life means that many employees in the UK struggle with their work-life balance and the demands of their job. In fact, according to the Mental Health UK Burnout Report, 91% of UK adults have experienced high pressure or stress at work in the past year. Of those surveyed, 1 in 5 said stress affected their productivity and performance.
Mental Health UK warns that, unless addressed, this level of stress could lead to “burnout” – a state of physical, mental, and emotional exhaustion – and other long-term conditions such as depression or anxiety.
Taking a micro retirement of a year or more could help you avoid this situation. An extended break may allow you to reduce stress and fully detach from your working life. On your return, you may find that you’re refreshed and, in the long term, have a better work-life balance.
You could also use a micro retirement to achieve certain goals that might be more difficult if you wait until later life. For instance, you may enjoy adventure travel that involves physically demanding activities. Alternatively, you might want to focus on other areas of life that are important, such as further education, writing a book, or quality time with your family.
However you decide to use the time, a micro retirement could mean that you’re better able to achieve your goals at every stage of life.
This could benefit you because, if you’re incredibly stressed and unable to spend time on the things you value, you might find yourself counting the years until you can retire. Conversely, when you improve your work-life balance and pursue your passions earlier in life, you might feel more comfortable working for longer before you fully retire.
In some cases, this could mean that you’re able to build a larger retirement pot.
Taking a micro retirement and working for longer could increase the size of your pension pot
Aside from some notable exceptions, such as professional athletes, most of us see our earnings increase throughout our career and reach a peak. Income then plateaus or falls slightly in the lead up to retirement.
Data from Totaljobs shows that the average UK worker can expect to reach their peak earning potential at age 46. If you take a micro retirement earlier in your career, and spend more time working later, after you reach this peak, you could be able to contribute more to your pension.
For example, calculations from Actuarial Post show that if you started work at 22, earning £25,000 and paying the minimum auto-enrolment pension contributions (5% employee, 3% employer), you’d have £163,000 in your pension at 62. This figure is adjusted for inflation.
If you were to take a micro retirement for a year at age 30, and then retire at 62, your pension pot would be £4,000 smaller. Yet, if you took your micro retirement and then continued working until 68, your pension pot could be worth £205,000.
As a result, you might be able to enjoy a better quality of life in retirement if you work for a few extra years. This might not be a problem for you if you’ve already achieved certain goals earlier in life during your micro retirements.
It’s also worth noting that, as life expectancies increase, you may need to fund your retirement for decades. Finding balance by taking early career breaks, and then working until later in life, could mean that you’re more likely to be able to fund your lifestyle throughout retirement. Consider reassessing your financial goals periodically to ensure they align with your evolving aspirations and needs. Additionally, understanding what drives your retirement plans can help you make informed decisions about saving, investing, and spending. Ultimately, developing a flexible approach allows you to adapt to life’s changes while securing the retirement you envision. Exploring comfortable retirement planning strategies, such as diversifying your investment portfolio or maximizing contributions to retirement accounts, can enhance your financial readiness. Engaging with a financial advisor can provide personalized insights and help clarify your goals, ensuring that your plan remains robust despite market fluctuations. Being proactive in your approach not only fosters peace of mind but also positions you to enjoy your retirement years to the fullest.
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If you want to explore alternatives to a traditional retirement, we can support you.
Email hello@fcadvice.co.uk or call 0333 241 9900 for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Our other retirement resources
What Is Flexible Retirement and Is It Right for You?
How the Trend of Micro-Retirements Could Improve Your Work-Life Balance and Boost Your Pension Pot