Zarah ChoudharyThe emerging trend of ‘micro-retirement’ – short, intentional career breaks taken throughout working life – could significantly impact long-term retirement savings, according to new analysis from Standard Life, part of Phoenix Group.
While taking a year off work at age 30 might result in a temporary pause in pension contributions, the analysis suggested that such breaks could encourage individuals to extend their careers, ultimately boosting their retirement funds.
Standard Life’s research showed that someone who began working at age 22, earning £25,000 annually and contributing the minimum auto-enrolment pension contributions (5% employee, 3% employer), could save £163,000 by retiring at age 62.
Taking a one-year break at age 30 might reduce that figure by £4,000.
However, if the same individual worked until age 68 instead of 62, they could retire with a pot of £205,000, an increase of £42,000.
Standard Life’s Retirement Voice 2024 study found that many Brits hoped to retire by age 62, six years before the State Pension age for those retiring after 2044-2046.
Phoenix Insights highlighted that UK workers hold more negative perceptions of work compared to their international peers.
Advocates of micro-retirement argued that shorter, planned breaks can improve work-life balance and overall wellbeing, potentially leading to greater job satisfaction and longevity in the workforce.
This evolving approach to careers and retirement reflects changing priorities among younger generations, who increasingly value flexibility and personal fulfilment in their professional lives.
The report suggested that a more flexible approach to career planning could not only improve individual wellbeing but also contribute to more sustainable long-term financial outcomes for employees.
Mike Ambery, retirement savings director at Standard Life, part of Phoenix Group, said: “Taking a ‘micro-retirement’ might mean a temporary pause in pension contributions, however the trend offers a unique opportunity for your ‘proper retirement’ savings as well as shorter-term personal wellbeing.
“We know that people who feel fulfilled and happy tend to stay in work for longer, so taking time out and returning to your working life refreshed and motivated could extend your career and leave you with a larger pot.
“As you tend to be at your peak earning potential later in your career, saving for a few extra years just before retirement could have a disproportionately positive impact.
“There’s a good chance people will be living longer in future and so retiring a few years later, with a bigger pension, could give you a better chance of ensuring your savings last as long as you need them to.
“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.”
