Beyond money: planning identity, income and belonging in retirement

Retirement is generally hailed as an event to be celebrated: a time to embrace the activities you love and step away from the stresses of work. But your job or your own business may be much more than just a source of income. Work often provides companionship, belonging and self-worth. So, for some, retirement may be viewed with trepidation and a fear of loss.

Retirement and identity

Your sense of self is fundamental to your wellbeing. According to psychologists, the concept of identity is complex. It depends not just on personal traits but also on social connections, because how others see us contributes strongly to how we perceive ourselves.

Life events that disrupt your social networks, such as retirement, can trigger a wobble in your sense of identity, which is often associated with reduced life satisfaction and even mental and physical health issues.

Therefore, it is important to plan for retirement, not just financially, but also emotionally and to consider what new social networks you want to develop to replace those you enjoyed while working. In other words, you need to explore the identity of the retired ‘you’ that will keep you happy and fulfilled.

Phased retirement: easing the transition

One way to do this is to ‘phase’ your retirement. This means that, rather than leaving your current job entirely, you cut back your hours and work part-time. Based on what your current or new employer permits or what works with a business you run yourself; you could move to a shorter working week or work each day for only part of the day.

Financially, you may want to support phased retirement by drawing a partial pension from any workplace or personal scheme you belong to, so that you can replace the drop in earnings that normally goes with reduced hours. You must have reached at least age 55 (rising to 57 from 6 April 2028) to be eligible to start making pension withdrawals.

How to use your pension

If your employer offers a defined-benefit scheme, where your pension is linked to your earnings, there may be rules about how much of your pension you can start withdrawing, based on how much you reduce your hours. You will also usually be able to choose to take some of the benefits as a tax-free lump sum.

If you belong to a defined-contribution scheme, where you build up your own personal pot of savings, there are several ways to start taking a partial pension:

• Use part of your pot to buy an annuity (a taxable income for life) with the option to take some of the savings as a tax-free lump sum now.
• Put some or all the pot into a drawdown. This means leaving your savings invested but being able to take a tax-free lump sum now and a flexible, taxable income as and when you want to.
• Leave your pension pot as it is and draw off lump sums (called uncrystallized funds pension lump sums or UFPLS) as and when you choose. In this case, a quarter of each lump sum is tax-free and the rest is taxable.

If you are worried about transitioning to retirement, a key aim of phased retirement is to free up time to dip your toe into what retirement can offer, especially activities that draw you into new social groups.

Social life in retirement

There is a huge range of activities available. You might build on your existing interests – sporting, cultural, creative and so on – or try something completely new. Joining organized classes in your local area is an obvious way to build new social connections. You may also find that ad hoc over-50s sessions, for example, at your local leisure centre, have a natural social side, with people chatting and perhaps going for coffee together afterwards.

Locally, there may be groups you can join that specifically aim to bring older residents together and often have a programme of events, such as lectures, quizzes, dinners and outings, running throughout the year. Your local community centre, council, public library or Facebook will usually have details.

Of note is the University of the Third Age, better known as the u3a. This has over 1000 branches across the UK and is open to anyone who no longer works full-time. Each branch puts on some events and trips open to all members but what makes the u3a unique is that members themselves initiate and run interest groups where participants share and learn existing and new knowledge and skills together, whether this be art, languages, genealogy, history, debating current affairs, walking, book groups, pickle ball, bus-pass travel, scrabble, music, theatre or hundreds of other subjects.

You may prefer groups that do not target specific age groups. For example, if you like historic buildings and gardens, the National Trust has many supporter groups where local members share their interest through outings, lectures and other events.

Finding purpose through giving back

Another option might be your local branch of social purpose groups, like the Freemasons, Round Table, Soroptimists or Women’s Institute. They offer a strong sense of belonging while raising money for and taking part in, social projects.

Local groups typically need a committee or trustees to run them and you might find a new sense of purpose and identity by volunteering to serve on such a committee as a chairperson, secretary, treasurer, events organizer or in another capacity. This can be an opportunity to continue using skills you have from your job or to develop new ones.

Similarly, many local and national charities rely on volunteers to deliver their mission, either wholly or working alongside the charity’s paid staff. The types of charity and work involved are diverse, ranging from health, young people and debt advice to animals, conservation and heritage. For suggestions and links to local volunteering, you could start with organizations such as Do It and the National Council for Volunteering (NCVO).

Do not expect every activity to click instantly with your emerging retired self. Use your time in phased retirement to test what excites you and gives you a good feeling about yourself.

Health and energy permitting, there is no reason to give up work completely if it is a real source of pleasure for you. You may find a satisfying balance between continuing part-time work alongside semi-retirement.

Alternatively, you may find that after a period of experimenting with partial retirement, you have found a new identity and sense of belonging that enables you to step away from paid work without regret and fully embrace all that retirement has to offer.

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