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MoneyWeek article - what to consider if you un-retire

Journalist: Marc Shoffman, Freelance

ended 12. March 2024

Research by Standard Life suggests 14% of retirees aged over 55 have gone back into work as their living costs have increased and their pension is not sufficient to fund retirement. A further 4% are also considering returning to work.

I am looking for comments from career experts/financial planners/retirement experts on:

What people should consider if they are unretiring/going back to work?

What if you are already taking pension income, how could this hit your tax bill?

Can you still contribute to your pension if you are in drawdown? Can you start a new pension if you have already taken out an annuity and then return to work?

What is the best way to avoid having to unretire?

4 responses from the Newspage community

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Scott Gallacher
Director at Rowley Turton
For individuals receiving secure incomes like State Pensions, Annuities, or Defined Benefits, Income Tax on returning to the workplace can often come as a surprise, as their Personal Allowance may already be utilised. This results in higher-than-expected tax deductions, potentially making employment less enticing. However, once you've reached State Pension age, the absence of National Insurance contributions can alleviate some financial concerns.

Those who've opted for flexible pension income options, such as drawdown, need to be mindful of the Money Purchase Annual Allowance (MPAA). This allowance caps total contributions to Defined Contribution pensions at £10,000 per tax year. While this limit may not impact part-time workers significantly, those in higher-paying full-time positions should monitor it closely to avoid unexpected tax charges.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Planning what you'll do with your time in retirement is just as important as planning the financial side of things. We speak to clients who initially think they want to retire, but on further discussion, they really want to do something else as they aren't ready for a cliff-edge drop-off in their working life. At that point, it's often not about the money anymore, but to give some structure and purpose to their lives.

If a pension has already been accessed, it's possible there will be limits on how much can be contributed if you go back to work (Money Purchase Annual Allowance). If an annuity has started, then depending on the amount received, it could be that all income from work is taxed at 20% or higher.

We always advise clients to think carefully about whether they'd prefer to transition into retirement by reducing working hours, moving into consultancy roles or something else entirely whilst they get used to what it'll be like having less structure and more time on their hands
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Jen David
Owner at Jen David
Returners will need to consider creating a CV that shows they still have their finger on the pulse with up-to-date skills and industry knowledge. They’ll also need to tailor it to prevent age discrimination (illegal yes, but not eliminated) and positively explain any gap between finishing their last role and applying for a new one. If they’re aiming for a less senior role than previously, or if they’re targeting a new industry, the focus will need to be on transferable skills and contributions rather than executive or sector-specific experience.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
Most people can contribute up to £60,000 a year into their pension.

Watch out though; if you have already started to receive an income from your pension then you trigger what is unhelpfully known as the Money Purchase Annual Allowance. This means you can only contribute up to £10,000 a year.

Having a properly prepared Financial Plan where you have looked at your lifetime cashflow, as well as the appropriate investment strategy, should put you in the best possible position for being able to stay retired.