The latest employment figures suggest that the Covid-19 pandemic and subsequent lockdown could be driving an increase in the number of people retiring before the age of 65, according to analysis by Aviva.

The firm highlighted that the number of individuals who label themselves as ‘retired’ before the age of 65 has increased by 55,311 in the last four months, marking the biggest four-month rise since the default retirement age was made illegal in 2010.

According to the latest figures from the Office for National Statistics (ONS), 1.17 million people currently define themselves as retired before the age of 65, up from a record low of 1.09 million in January.

Aviva head of savings and retirement, Alistair McQueen, commented: “The employment market is obviously being severely challenged as a result of the pandemic, but we should also not lose sight of the importance of a fuller working life.

"This rising trend in 'early retirement' comes at a time when we should be supporting a fuller working life, for those who want it.

“Work is one of the most powerful ways of funding our longer lives. Yet, we continue to see a collapse in employment participation as people progress through their fifties."

He added: "Any acceleration of this collapse would be bad for the UK economy, and would represent a huge loss of skill, experience and potential."

The Investing and Saving Alliance (Tisa) have also warned that whilst the latest figured showed roughly stead levels of unemployment, a sharp unemployment rise following the closure of the government's Coronavirus Job Retention Scheme could see the number of deferred pension pots "sky-rocket".

The group highlighted the importance of pensions dashboards in such a landscape, emphasising the need for the government to recognise the "urgency" of the initiative as the Pension Schemes Bill progresses through the House of Commons.

Tisa pointed out that the number of workers on payroll has dropped considerable since the introduction of the Coronavirus Job Retention Scheme, with over a quarter of the UK workforce now furloughed.

From August, employers will not be able to claim for pension contributions, with further growing costs for employers until the end of October.

The alliance clarified that whilst current unemployment figures are “encouraging”, the real test will be when the above changes are actually in place, stating that there would “no doubt” be an increase in those currently furloughed being made redundant.

Tisa head of retirement, Renny Biggins, explained: “As unemployment begins to rise sharply, the number of deferred pension pots is set to sky-rocket, potentially doubling from the 7 million inactive pots in January.

“These are significant numbers and another reason why the pensions dashboard needs to be actioned as soon as possible.

“It is in economic crises that transparency and simplicity of managing personal finances is of utmost importance."

He added: “We welcomed the clearing of the Pension Schemes Bill in the House of Lords yesterday, and urge the Commons to acknowledge the increasing urgency of this initiative.”

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