What You Need to Know About Working Past Retirement Age in the UK

For past generations, reaching retirement age generally meant the end of one life stage and the beginning of another. It was a time to finish work and enjoy the rest of your years with the help of a state pension. In the 2020s, however, all of that is changing. Whether by choice or necessity, more and more people are working past retirement age. That might be a continuation of your current job, starting a new career, or even returning to work after retirement.

One of the most common reasons to work past retirement age is the rising cost of living. Higher energy bills and food prices are forcing many older adults to stay in employment longer or return to work after they retire. It isn’t all doom and gloom though. For many, working past retirement age provides purpose, connection, and flexibility.

Here are the key facts you need to know:

• The current state pension age of 66 will rise to 67 between 2026 and 2028.
• There’s no compulsory retirement age. You can keep working for as long as you choose.
• You can receive your state pension and workplace pension while you continue to earn.
• Working past retirement age means you may pay tax on your income.

So what choices are open to you when you reach retirement age in the UK?

What are your options at retirement age?

When you reach retirement age, you don’t have to give up work unless you want to. You can choose from any of the following options.

Keep working

You can continue in your current role, reduce your hours, or find a new job that better suits your lifestyle. Many employers welcome experienced workers. You could even start your own business.

If continuing to work full-time will be too restrictive, why not ask for part-time or flexible hours instead?

Retire

You can stop working and begin drawing your pensions. For many people in the UK, that will mean your state pension, workplace pension, and any private pension you’ve paid into.

Retire then return

It might be that you initially retire and then return to work later. That might be for financial reasons, to keep your mind active, or simply to have a wider network of friends and colleagues.

Defer your state pension

If you don’t need your state pension right now, you can defer it. This increases how much you’ll receive each week when you do start claiming your pension.

How working affects your pension and tax

Most people who reach retirement age will receive a state pension and a workplace pension. If you continue working, here’s what you need to know about your financial situation:

• Income tax: Even after retirement age, all income over your personal allowance is taxable. If your total earnings from pensions and employment is more than your personal allowance, you’ll pay income tax.
• National insurance: Once you reach retirement age, you stop paying national insurance contributions, even if you continue to work.
• Higher tax band risks: Receiving pensions and job earnings can push you into a higher tax bracket.

The gov.uk website offers more information about national insurance and tax after state pension age.

Why would you work past retirement age?

Maybe you hadn’t considered working past your retirement age, or perhaps you’re still weighing up the pros and cons. Whatever your situation, here are the reasons why you might decide to work after you reach retirement age.

Financial stability

Will you struggle to meet the costs of your retirement, support your family, or maintain your lifestyle with only your pension income? If so, you may decide to continue working after retirement age.

Mental stimulation

Besides income, work provides structure, purpose, and keeps your mind ticking over. You may decide to continue working to stay active and healthy and support your mental health.

Social connection

Workplaces offer community, friendship, a sense of belonging, and social interaction. For some people, leaving all that behind when you retire can lead to feelings of isolation and loss. Continuing to work after retirement age, however, can maintain those social ties.

Career fulfilment

If you love what you do for a living and just aren’t ready to stop, working past retirement age is the obvious step to take. This is especially true if you’re on the verge of grasping that desired top rung of your career ladder.

An opportunity to branch out

With the income of a pension to support you, this may be the perfect time to start your own business, become a consultant in a field you’re experienced in, or apply for that dream but poorly paying job you’ve always wanted to land.

Not sure of your appeal to employers as an older worker? Read Finding a job in your 60s.

Wrapping it up

Working past retirement age can support your lifestyle, finances, and wellbeing. But whether you plan to stay in your current job, explore a new career path, or return to work after retiring, it’s important to understand your options and the tax implications. With some thought and planning, you can safeguard your quality of life, find out which working option suits you now and in the years ahead, and make informed decisions about your pensions and income.

Reaching retirement age doesn’t have to mean the end of your working years. The choice is yours to make.