Those that choose not to retire when they reach State Pension age but that continue to work do so for a variety of reasons. These may come with some useful benefits that could help pensioners increase their income and pension and that may even help them enjoy retirement more.
Possible Lifestyle Benefits of Working Past State Pension Age
A lot of people simply don’t want to give up work when they reach retirement age. They just don’t feel ready. For some, continuing to work is a good lifestyle choice. They feel that the mental stimulation and perhaps even the physical benefits of working will suit them better than simply retiring. Keeping fit, healthy and active, both mentally and physically, may help people stay healthier for longer.
Many also find the prospect of a long retirement a lonely and even boring concept. They may well want to relax a few years down the line but may not be ready to give up work as yet. Staying in their pre-retirement job or taking on new part-time or even full-time work suits them better. This may also bring a range of financial benefits.
Working in Retirement May Give Pension, Tax and National Insurance Breaks
For some, one of the biggest benefits of working in retirement is the money. Those that haven’t saved enough for a comfortable retired life may find that a few extra years of work may help. There are some useful additional benefits that may help at this stage. For example:
- Those reaching State Pension age no longer have to make any National Insurance contributions on their income.
- Their personal tax allowance will increase once they reach 65 allowing them to earn more before being liable for income tax.
- Those that can bring in enough money to allow them to defer a claim on their State Pension could increase it or get a useful one-off payment.
Bear in mind that pension income in general in the UK is taxable so the State Pension and other personal/company products may all count towards an individual’s tax allowance as well as any earnings from work.
When is Working in Retirement Not Such a Good Idea?
If an individual feels that they have no other choice but to carry on working even though they don’t want to, then they are unlikely to enjoy their working retirement. Some people do have to do this because they cannot manage financially without some extra income.
Those struggling with retirement costs may find it useful to look at the “Benefits & Tax Allowances in Retirement” page on the UK government’s DirectGov website. Some may be eligible for additional help.
Those approaching/planning retirement may also want to get a State Pension forecast to help them assess their potential income. Used as part of an overall retirement budgeting process, this can allow individuals to work out how well their savings and pensions will cover their spending needs. If necessary, moves may then need to be made to cover any shortfalls.
Source: DirectGov
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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