Your guide to retirement: can you work and what can you earn?

This content was reviewed and approved by Andy Gray.

Almost at State Pension age and wondering whether retirement is for you? You have options. Despite hitting their 70s and 80s, thousands of Brits around the UK choose to keep working. Some do so to top up their income, whereas others continue to work for social and health reasons. There’s no requirement for you to stop working the minute you can claim your pension.

Of course, you may choose to have some time away from work to enjoy retirement and live off your pension. If you’re planning to unretire after a few years, you do have the option to do so. Around one in six of over 55s in the UK have actively chosen to unretire and head back into work. 

If you think working past retirement might be for you, but are unsure about the disadvantages of working after retirement in the UK, there are a few things you need to know and consider. We cover it all below.

Can you work after retirement?

Yes, no rule says you can’t work into retirement. In fact, well over 440,000 Brits aged 70 or older still work in some capacity. Whether part-time, full-time or self-employed, if you wish to work past your State Pension age, you’re fully entitled to.

While there are obvious advantages to retirement, there are also disadvantages to working after retirement in the UK. It can boost your income and keep you active, but it could also push you into a higher tax bracket.

Can you go back to work after you retire?

Nothing is stopping you from heading back to work even after you’ve been retired for some time. Many choose to go back to work as a way to top up their income as well as for personal reasons, such as socialising or health.

There are many reasons why you might choose to go back to work. These include:

• to top up existing income,
• to finish paying off larger debts, such as mortgages,
• to maintain independence,
• to remain mentally and physically healthy.

Please note that if you have accessed a defined contribution pension and choose to return to work and want to pay into your pension, you may be capped through the Money Purchase Annual Allowance (MPAA). The aim of the allowance is to restrict people ‘recycling’ money back into their pensions to take advantage of tax relief. In 2023/24 the allowance is £10,000. If you are unsure if you have triggered the MPAA, it is worth seeking financial advice.

Can you retire at any time if you’re working post-State Pension age?

Technically, you can retire at any time – you just can’t claim your State Pension until you hit State Pension age. State Pension age differs from person to person, but you can find out what your State Pension age is on the GOV.UK website. Therefore, if you’re working into your 70s and 80s, you’ll be able to retire and claim your pension. You’ll just need to give your employer notice first.

With no default age for retirement in the UK, you can technically start claiming your workplace pension from age 55 (depending on the provider) and your State Pension when you hit your State Pension age.

Can your employer force you to retire?

Your employer can no longer force you to retire based on your age either. Before April 2011, employers could request employees retire, but this is no longer the case. However, there are some exceptions where an employer can force you to retire by law. These include industries that have an age limit set by law, such as the fire service, or jobs that require a specific level of physical and mental competence.

When can you claim a workplace or private pension?

Depending on your pension provider, you may be able to claim your workplace or private pension from age 55 onwards (age 57 from 6 April 2028). However, if this isn’t the case, you’ll likely be able to start claiming between age 60 and 65 years old.

When you hit the right age to claim your private or workplace pension, you’ll normally be able to take up to 25% of your pension pot tax-free, with the remaining 75% taxable as income. If you're in a defined benefit scheme, your pension scheme will then provide you with an income for life (usually linked to your salary). However, if you're in a defined contribution (also known as money purchase) scheme, you'll have the following options:

• Take the tax-free lump sum and leave the rest invested until you need it.
• Claim it all. It’s worth noting you could face a larger tax bill that year to accommodate the payout.
• Drawdown money from your pension pot as and when you need it (you can do this with both the tax-free and taxable elements of your pot). You’ll have the flexibility to access savings, but you’ll need to make sure it’s enough to get you by.
• Take the tax-free lump sum and invest your pension into an annuity, which offers you a guaranteed, steady income.

It’s possible to combine your options; you can take your 25% tax-free amount and invest the other 75% in a combination of pension drawdown and an annuity, for example.

If you’re unsure what you want or what you should do with it, you can speak to a retirement advice specialist who can advise on possible routes that will work for you.

Can you defer your State Pension?

It’s possible to defer claiming your State Pension when you hit your State Pension age. For every week you defer it, your State Pension amount will increase, but you’ll need to avoid claiming it for at least nine weeks. If you can afford to do it, under the new State Pension your total amount will increase by up to 1% for every nine weeks it’s deferred. That means, if you hold off claiming your State Pension for a year, your amount could increase by just under 5.8%. However, if you were to die whilst deferring your State Pension, the deferred amount will be lost.

For those eligible to claim their State Pension before 6th April 2016, the rules for deference are slightly different. If you defer your pension for at least five weeks, your pension will increase by 1%. Therefore, if you’ve deferred for a year (52 weeks), it works out at an increase of 10.4%. If you deferred for at least a year, you will also be given the option of taking your deferred pension as a lump sum, with interest added. In addition, your spouse may be able to inherit the deferred amount if you were to die before claiming it.

Before deferring your State Pension, it’s worth discussing your options with a retirement advice specialist. If you can afford to hold off claiming your State Pension and want to increase the amount, it might be a good choice to defer it. However, if your circumstances mean you’ll struggle without it as a source of income, deference may not be the best choice. That’s why it’s best to speak to someone who can talk you through your options.

There may also be circumstances where working into your retirement years is both right and wrong for you. Before you consider your options, it’s worth considering the following:

How much can you earn after retirement?

There’s no limit to how much you can earn in retirement as you’ll continue to pay taxes. If you wanted to, you could work full-time whilst claiming your pension. Unfortunately, doing this could push you into a higher tax bracket, causing you to pay more tax than if you were to just continue working and defer your pension, or vice versa. However, you won’t pay National Insurance on any earnings from your post-retirement years.

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

The same working rights apply to you post-State Pension age as they did before you reached pensionable age. As you are covered under employment law, you won’t be able to work more than 48 hours a week, unless you choose to opt out or have already opted out.

Likewise, there’s no minimum number of hours you can work either. The choice and options sit between you and your employer. If you wish to adjust your hours to full-time or part-time, you’ll need to discuss options with your employer.

Can you work part-time and claim a pension?

Yes, it’s possible to trade in your full-time job to work part-time and claim your pension at the same time. Around 3.6 million people aged 50 and over are working part-time in the UK, according to official government data, and two-thirds of people working past the age of 65 do so on a part-time basis.

It’s worth noting that the amount you receive from your pension and part-time work will be taxed, so if both incomes push you into the higher tax bracket, you’ll need to account for it.

Can you work full-time and claim a pension?

If it suits you, you can continue to work full-time whilst claiming your pension. However, you may find more benefits from deferring your pension and accessing it at a later date. For one, you can accumulate more on your State Pension if you leave it for at least nine weeks. There’s a slight risk that you may earn more by combining your pension and salary, meaning you’ll have to pay more in tax. If you earn more than £50,270 in a tax year, you’ll have to pay tax at a rate of 40%.

What type of work can you do?

Almost anything – there are a handful of jobs that do require you to retire at a certain age, but these are defined by law. The fire service, army and police have set ages for existing employees to retire. You won’t be able to enter these professions when you hit retirement age either.

Aside from those and a few others, which are normally dictated by individual employers and companies, the world is your oyster. You can keep working at your current company, for yourself or try something new altogether. The Equality Act 2010 protects you against age-based discrimination, so there’s no reason why you can’t keep your job or find something different.

What are the advantages and disadvantages of working after retirement in the UK?

Continuing to work is the right choice for some but might not be the right choice for others. You’ll need to weigh up your options and determine your priorities. For example, if you require income, it may not be feasible to work and claim your pension at the same time.

Working after retirement can enhance your income, you can keep paying into your pension, and it can improve your wellbeing. But there are also downsides to working into your retirement years. For example, you may be reluctant to work unsociable hours, your work may come with unwanted pressures, and you could pay more tax.

Some enjoy the freedom of retirement, while for others without a solid retirement plan, it may be unavoidable.

Nearing State Pension age? Try our retirement advice service

At LV=, we’re here to help you understand retirement. As part of our retirement advice service, we’ll support you in finding the right options for you when you retire. How can we help you today? Get in touch.

FAQs

Can you work after medical retirement?

Retiring due to medical or ill-health reasons doesn’t mean you’re no longer able to work. It could mean that the role you were originally doing was too challenging for your abilities. You may choose to find a new job altogether that’s more suitable.

Alternatively, you may not be well enough to continue working, meaning you need to access your pension early if you don’t have income protection. If this is the case, you may be able to pause claiming your pension to go back to work, but only if you’re able to.

Do national insurance contributions change if you work through retirement?

Yes. Once you hit your State Pension age, you’ll stop paying National Insurance contributions as you’re eligible to claim your State Pension. However, if you’re self-employed, you’ll continue to pay Class 4 contributions until the end of the tax year when you reach State Pension age. You also don’t pay any National Insurance contributions on withdrawals from a private pension, even when under State Pension Age.

How does tax work when you retire?

Unless you fall into a new tax bracket, the way you’re taxed stays the same. For those claiming a pension and working at the same time, your income will increase, meaning you could fall into a much higher tax bracket. In this case, you’ll pay a higher percentage on your income. Alternatively, your income may fall if you solely claim your pension, causing you to pay less tax.

As long as your income sits above your standard Personal Allowance (£12,570 between 2023-2024), you’ll pay tax on anything you earn above this figure.

What happens to your pension if you go to prison?

For the period of time you’re in prison, you’ll lose your rights to a pension. These rights are granted back when you’re released. If you’re at the age where you can claim your State Pension, you won't be able to receive this whilst you are in prison and the missed pension payments will be lost. If you have a private pension, this may depend on the rules of your specific pension plan.