Reaching state retirement age does not have to mean the end of your working life, and some people use it as an opportunity to start a new career.
The standard retirement age of 65 was abolished in 2011 and many now choose to work beyond the current state retirement age of 66 for a variety of reasons, according to the Times, including “lack of savings, loneliness and love of work”.
Figures from the Office for National Statistics for April to June 2022 show that the number of people aged 65 and over in employment rose by a record 173,000 to 1.468 million in the quarter, also a record.
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Continuing to work or retraining can open up more financial opportunities, says Saga Magazine, “especially if you’re worried about relying on your pension and savings alone.” It can also provide “tremendous mental stimulation.”
According to Standard Life, there is a growing trend of older people returning to work later in life, known as ‘unretiring’, but there are several factors to consider when deciding whether this is the right path for you.
Where to work
Older workers who return to work in old age are an “attractive option” for employers, Rest Less said, because they have experience and a strong work ethic and are “organized, efficient and confident.”
You cannot be “forced to retire”, says Independent Age. One option is to discuss a “phased retirement plan” with your employer to move to flexible working hours and “take into account your caring responsibilities or give you time to do other things”.
Alternatively, you could freelance or start your own business, Saga added, to “achieve some autonomy over your work structure.”
You can get advice from the National Careers Service, which offers a Skills Health Check to help you “decide what type of job might be suitable for you”.
It is also worth considering adult apprenticeships, says the Apprenticeship Guide, which can “provide valuable opportunities for those looking to improve their qualifications or make a significant career change”.
Impact on taxes and state pensions
You could top up your state pension and reduce your tax burden by working beyond the age of 66.
If you work beyond 66, it may be worth waiting a few more years to claim your state pension, as you will get more “as long as you live long enough to benefit from it”, according to The Telegraph.
This is called deferring your state pension. You must delay claiming for at least nine weeks, after which your state pension will increase by around 1% for every nine weeks you defer, “that’s just under 5.8% per year”.
In addition, according to NIDirect, you are likely to “bring home more money” as you will no longer pay National Insurance contributions once you reach state pension age.
What returning to work means for your pension
Once you reach state pension age, you may no longer have to pay national insurance contributions, but you will still have to pay income tax.
If you already take money out of a private pension in the form of a pension or payout, additional income from employment could “potentially increase your income tax bill” and even push you into a higher tax bracket, according to MoneyWeek.
This could also be a problem if you are already receiving a state pension, as its current rate of £11,502 a year will eat up “most” of your personal allowance of £12,570, Saga said.
You may also need the help of an accountant to declare untaxed income on your first tax return, Saga added. It is also important to be wary of scammers who “target those who are new to the process” when doing the self-assessment.
