Disadvantages of working after retirement in the UK: all the rules

Although there are some obvious advantages, there are plenty of disadvantages of working after retirement in the UK and challenges of navigating the working after retirement rules. This Moneyfarm blog takes a look at both sides of the argument.

The pros and cons concerning working after retirement

There are always two sides to most arguments, and when it comes to the disadvantages of working after retirement here in the UK, that too has a flip side. So let’s begin by looking on the bright side.

What are the advantages of working after retirement?

The sunny side of working after retirement age includes the following pros:

• Boosting your income.
• No need to pay National Insurance.
• The chance to further your investments.
• To relieve the boredom of being at home – which is why many people take to working part-time after retirement.
• Wider social contact.
• The feeling that you still have something to offer and are contributing.
• If you defer your state pension, you will receive larger payments when you finally activate it.

What are the disadvantages of working after retirement?

There are several disadvantages of working after retirement in the UK. We are going to list a few critical ones below.

• Earnings from jobs after retirement could push you into a higher bracket for income tax.
• Subjecting yourself to more stress than is necessary
• If you have to commute, it reduces the benefit of the additional income benefit
• Having less free time to spend with loved ones.

Of course, not all people have the right retirement plan in place, and if you are one of the unlucky ones, returning to work after retirement might be unavoidable.

Statistics – Working after retirement age – How many people want to?

A survey conducted by the Centre for Ageing Better in December 2018 showed that 38% of people were looking forward to retiring while only 13% were not. In addition, 11% said they didn’t want to but thought they would have to continue working after retirement to survive financially.

A survey by British Seniors in December 2020 reported that approximately 46% of Brits over 50 were looking forward to retiring. However, for many, this means reviewing their 50s retirement savings options.

With regard to the “how much do I need to retire” question, the British Seniors’ survey also reported that 48% of people didn’t think that when they reached their preferred retirement age, they would have met their financial goals, which is why choosing a suitable pension scheme early in your working life is so important.

All in all, it’s a clear sign that people who want to avoid working in retirement will need to consider their pension options earlier in order to generate the size of pension pot they will need.

Let’s take a look at some frequently asked questions concerning beyond-retirement-age working.

How many hours can I work after retirement in the UK?

There are no working after retirement rules regarding the number of hours you can work in post-retirement jobs. You can work full-time or work part-time.

What to consider if you’re thinking about working after retirement age?

If you are considering working beyond retirement age, you need to consider several things, such as your state of health and your desire for social contact. In addition, if you’re not going to take a pension drawdown, reviewing your pensions is ideal and, if beneficial, do a pension transfer exercise.

How do I go back to work after retirement?

Finding retired person jobs after you’ve stopped working and taken retirement is the same as job hunting at any stage of life. If you work for the NHS, returning to work after retirement is possible, but only after 24 hours have elapsed since the termination of your NHS employment contract.

How can I go about continuing to work full-time?

You can continue to work past the state pension age by simply chatting with your current employer and making them aware of your wishes. The retirement age of 65 era has long since passed. Apart from certain specific professions, there is no longer a default retirement age.

Do I pay tax if I work after retirement age?

Yes, people who have post-retirement jobs will pay income tax in the normal way according to how much income they receive. But don’t forget, you must remember to include pension income if you are receiving it.

Is it worth going back to work after retirement?

It is very much down to the individual and your personal circumstances. However, you need to be aware that receiving pension payments while continuing to work after retirement could push your total income into a higher tax bracket

How much can I earn before it affects my pension in the UK?

Suppose you are working while on a pension, you’ll be able to earn up to £12,750 (personal allowance) before there is any impact on your pension. Of course, anything more than that and the standard income tax rate bands come into play.

How much can a retired person earn without paying taxes in 2022?

The normal income tax threshold of £12,750 still applies, even when you work past the state pension age. A total pension sum (including the state pension, his DB pension and a personal private pension) from £12,571 to £50,270 will incur a 20% income tax, while a pension sum of £50,271 to £150,000 will be taxed at 40%. Any pension above £150,000 will be taxed at 45%.

Final thoughts

Regardless of the disadvantages of working after retirement, you can work as much as you want post-retirement. Some people are happy working after 70 years of age, while others are looking at how to retire at 55.

The Moneyfarm pension guide will help you to evaluate your options. In addition, our self-employed pension blog contains some helpful information if you are self-employed.

You can also download a working after-retirement fact sheet from the Ageuk.org.uk website that contains helpful information.

FAQ

What are the risks I will face in retirement?

There are several post-retirement risks retirees face that will affect their retirement income. They include financial risks, such as running out of your pension, losing of purchasing power due to inflation, stock market volatility, and changing interest rates.

Personal risks include outliving your savings and investments, a rise in family expenses, the death of a spouse, and a change in marital status. Health risks include a rise in medical bills and changes in living situations. Finally, let’s not forget changes in public policy, such as healthcare benefits and taxes.

Can I work full time as a pensioner?

Yes, the forced retirement age in the UK was scrapped in 2011, so pensioners can continue to work full time for as long as they want. Also, working after retirement does not mean that you don’t have access to your pension. Pensioners can start receiving their pension from 55 onwards. Also, you can take out of your pension while working in retirement.

How does working after retirement affect my pension?

One of the disadvantages of working after retirement in the UK is its affects how much you will pay in taxes. You may lose more of your pension in taxes because any income you receive while working after retirement will be taxed, including all pension incomes from the state pension, personal pension and workplace pension. So, if your total income exceeds your personal allowance, you will be taxed at your income tax band.