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If you\u2019re contemplating a return to work after a significant absence or considering a phased return, there are several factors to consider. Here, we will explore how \u2018unretirement\u2019 could impact your finances, including effects on your State Pension and workplace pensions, as well as potential tax implications.<\/p>\n
What returning to work could mean for your pension<\/strong> If you have already started drawing benefits from a workplace pension or the State Pension before returning to employment, there may be specific implications you need to consider.<\/p>\n State Pension considerations<\/strong><\/p>\n What happens to my State Pension if I go back to work?<\/strong> To claim any State Pension, you need at least ten qualifying years of NICs and 35 qualifying years to claim the full new State Pension[1]. A qualifying year is a tax year in which you have paid or been credited with enough NICs to count toward your State Pension. If you don\u2019t yet have 35 qualifying years, working longer could boost this, thereby increasing the amount of State Pension you receive.<\/p>\n Can I defer my State Pension if I go back to work?<\/strong> Workplace pension implications<\/strong><\/p>\n Will I get a new workplace pension if I go back to work?<\/strong> People over the State Pension age<\/strong> Returning to a previous employer<\/strong> Potential loss of benefits<\/strong> Saving and withdrawing from existing pensions<\/strong><\/p>\n Can I keep saving into or withdrawing from my existing pensions if I unretire?<\/strong> If you\u2019ve already started withdrawing from your pension pots, you may have triggered the Money Purchase Annual Allowance (MPAA), reducing your Annual Allowance to \u00a310,000 each tax year. Only income from a defined contribution (DC) pension affects the MPAA; income from a defined benefit (DB) pension does not trigger it. If you maximise the \u00a310,000 into your DC pension, you can still accrue a pension input amount of up to \u00a350,000 pa in your DB pension before incurring a charge, known as the Alternative Annual Allowance (plus any carry forward that you have available).<\/p>\n Tracking down lost pensions<\/strong> Tax implications<\/strong><\/p>\n What unretiring means for tax<\/strong> Your age does not affect whether you pay Income Tax; you\u2019ll continue to pay it if your taxable income, including any private and State Pension income, exceeds your tax-free allowance. The annual standard Personal Allowance is \u00a312,570 for the 2024\/25 tax year. NICs must continue following tax rules for those below the State Pension age and returning to work.<\/p>\n Source data:<\/strong> THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.<\/p>\n A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).<\/p>\n THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.<\/p>\n YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Contemplating a return to work after a significant absence or considering a phased return? In what some call \u2018The Great Unretirement\u2019, many retirees are re-entering the workforce. The reasons for this trend are as varied as the individuals themselves, but the rising cost of living has driven many to seek ways to bolster their financial […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/posts\/4830"}],"collection":[{"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/comments?post=4830"}],"version-history":[{"count":0,"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/posts\/4830\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/media?parent=4830"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/categories?post=4830"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.clarksonhall.co.uk\/news\/index.php\/wp-json\/wp\/v2\/tags?post=4830"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nUnretiring can be an exciting prospect. Beyond financial considerations, returning to work can offer benefits such as mental stimulation and social interaction. Many individuals contemplating a phased approach to retirement express a desire to keep their minds active and connect to working life.<\/p>\n
\nIf you\u2019ve reached the State Pension age, you should be able to continue claiming it even if you return to work. Conversely, if you haven\u2019t yet reached State Pension age, working and paying National Insurance Contributions (NICs) could increase the amount of State Pension you receive. The State Pension age is 66, rising to 67 by 2028.<\/p>\n
\nIf you\u2019ve previously claimed your State Pension, you can stop claiming and defer future payments. However, you can only do this once, and you must typically reside in the UK. The State Pension is not given automatically upon reaching the State Pension age; you must claim it.
\nThe government will send you a letter at least two months before you reach State Pension age with details on how to claim. If you wish to defer your pension and haven\u2019t yet claimed it, it will be deferred automatically until you take action. The government provides useful information on how deferring affects your State Pension, available on their website.<\/p>\n
\nFor those under the State Pension age, if you return to employment and earn more than \u00a310,000 a year, you should be automatically enrolled in a workplace pension scheme. You\u2019ll contribute to your pension, as will your employer, and may benefit from government tax relief, which varies based on individual circumstances.<\/p>\n
\nIf you\u2019re over State Pension age and return to work, you won\u2019t be automatically enrolled in a workplace pension scheme. Nevertheless, you can opt in up to the age of 74, subject to your earnings[2]. You won\u2019t get tax relief on pension contributions once you\u2019re over 75, although employer contributions might still apply if they choose to do so.<\/p>\n
\nIf you return to a former employer where you had previously contributed to a pension, you might be able to resume contributions to the same pension pot. However, there\u2019s a chance you may need to start a new pot as if you were a new employee. It\u2019s advisable to check with your employer regarding their policies for returning employees.<\/p>\n
\nReturning to work might affect certain pension benefits, such as a protected pension age. This is when the age at which you can take benefits from your pension is fixed or \u2018protected\u2019, even if it\u2019s lower than the Normal Minimum Pension Age (NMPA), currently 55 but rising to 57 in April 2028[3].<\/p>\n
\nIf you return to work after retirement, you should be able to contribute to a workplace pension up to age 75. Your Annual Allowance permits a total contribution (employer and employee) of \u00a360,000 per year across all pension plans before attracting an Annual Allowance charge[4]. As well as the annual allowance limit, your own tax-relievable contributions are limited to 100% of your annual earnings.<\/p>\n
\nIt\u2019s estimated that over \u00a326.6 billion is sitting in lost and forgotten pension pots, with each pot in the 55 to 74-year-old age group averaging \u00a316,000[5]. Before returning to work, consider tracking down any old pensions you may have. Uncovering these can provide a clearer picture of your financial situation and might influence your decision to unretire. You can search for lost pensions through the government\u2019s Pensions Tracing Service.<\/p>\n
\nIf you\u2019ve reached State Pension age, you\u2019ll continue to pay Income Tax but will not pay NICs on your earnings. An exception is if you\u2019re self-employed and pay Class 4 NICs, which stop at the end of the tax year in which you reach State Pension age. Not paying NICs could offer a significant financial incentive to return to work if you\u2019re above this age threshold.<\/p>\n
\n[1] The new State Pension.\u00a0Data source, accessed February 2024.
\n[2] Automatic enrolment if you\u2019re above State Pension age.\u00a0Data source, MoneyHelper, accessed February 2024.
\n[3] Increasing Normal Minimum Pension Age.\u00a0Data source, GOV.UK, 4 November 2021.
\n[4] Tax on your private pension contributions. Data source, GOV.UK, accessed February 2024.
\n[5] Lost pensions 2022: what\u2019s the scale and impact?\u00a0Data source, Pensions Policy Institute, October 2022.<\/em><\/p>\n