A growing number of Gen Z and millennials are expressing interest in taking year-long breaks from work, known as ‘micro-retirements’, to enhance their wellbeing and achieve better work-life balance.
Standard Life research indicates that these breaks could also bolster retirement savings if individuals extend their working years as a result.
The concept of ‘micro-retirement’ is gaining popularity in workplaces, alongside younger workers’ penchant for flexible working and a greater openness to change their employer if ‘the vibe is off’.
Standard Life said that while a year away from work might temporarily pause savings, continuing to work longer could significantly enhance an individual’s pension pot.
The pension provider’s Retirement Voice 2024 study found that the average desired retirement age for British workers is 62, six years earlier than the state pension age for post-2046 retirees of 68.
Phoenix Insights said that UK workers tend to view work more negatively compared to their global counterparts. It suggests that embracing a more flexible approach to work and retirement could extend careers by six years, resulting in an extra £42,000 in average pension savings.
Standard Life calculated that someone starting work at 22 with a £25,000 salary and making minimum auto-enrolment contributions could save a retirement fund of £163,000 by age 62 (adjusted for inflation). If they took a 12-month ‘micro-retirement’ at 30, it would cut their savings by £4,000, but if they worked until 68 it could increase to £205,000 representing an additional £42,000.
Mike Ambery, retirement savings director at Standard Life, acknowledged that ‘micro-retirements’ may briefly halt pension contributions but he sees them as an opportunity to bolster short-term personal wellbeing and long-term retirement security. He said that as earnings typically peak later in your career, saving for a few extra years before retirement can have a disproportionately positive impact.
Ambery said: ““Ultimately, the micro-retirement trend reflects a broader shift towards greater flexibility and work-life balance, and an acknowledgement that in future our lives are likely to be more fluid than the traditional education, then earning, then retirement structure. With the right support and planning, it could lead to a more sustainable working life, while still enabling financial security in retirement.”
