Working past retirement age
If you want to carry on working, the law protects you from age discrimination. You can’t be made redundant, denied a promotion or pay-rise, or turned down for a role because of your age.
There is no default retirement age in the UK. In exceptional cases, however, employers can set a compulsory retirement age, but they must be able to clearly justify it.
As an employee you can request:
- Flexible working: once you’ve been working for your employer for 26 weeks or more you have the right to request flexible working hours. Your employer doesn’t have to offer you flexible working hours (which can include working your hours from home, flexible start and finish times), but they must consider your request in a reasonable manner.
- Going part-time: your employer isn’t obliged to offer you a part-time position if you want to reduce your working hours, but many are open to the idea. If you do take on a part-time position you’re entitled to the same pay rates, sick pay, holiday leave, training opportunities, career development and other benefits as a full-time employee. You should also be eligible for transfer, promotion or redundancy in the same way.
State pension age and National Insurance exemption
Once you reach State Pension Age (SPA) you stop paying National Insurance. To make sure that you don’t keep making contributions, you will need to show your employer some proof of age – you can reclaim later if you overpay.
You will still need to pay UK Income Tax if you’re earning more than the personal allowance, although if you were born before 6th April 1948, your personal allowance will be higher.
Deferring your state pension
Not everyone is eligible to receive a State Pension, but if you are, you don’t have to start taking your State Pension payments as soon as you reach State Pension age, you can defer them to start at a later date.
Depending on how long you defer your payment for, doing so can increase the size of your regular payments, or you can take a one-off lump sum.
- If you put off claiming your state pension for at least five weeks. Your State Pension will increase by 1% for every five weeks that you delay claiming – this is equivalent to 10.4% for every full year. For example, if you get the full state pension of £110.15 per week, you will earn an extra £595 if you put it off for a year. Extra state pension counts as income, so you will need to pay income tax on it.
- If you put off claiming your state pension for at least 12 months, you can choose to receive your extra allowance as a one-off lump sum payment, including interest at 2% above the Bank of England base rate.
If you do defer payments, a higher State Pension income later on could have tax implications and could also affect any means-tested benefits that you receive. If you do want to defer your State Pension and you’re already receiving other benefits, you’ll need to let the Pension Service know.
You won’t start receiving your state pension until you actively claim it, so you can defer it by not taking any action.
For more information on deferring your pension, visit Gov.uk.
Retirement income options
If you do decide to reduce your working hours, you may need to supplement your salary with an income from your pension pot.
There are two main options for generating an income from your pension pot:
- Annuities: you receive a regular income in return for a lump-sum payment from your pension pot. For more information read our guide to annuities.
- Drawdown: you draw directly from your pension pot while it remains invested. For more information read our guide to pension drawdown.
Remember that the earlier you start taking an income, the longer your pension pot will need to last.
Preparing for a full retirement
If you plan to stop working completely later on, you’ll need to make sure you have you have enough in your pension pot to meet your income needs.
- Decide how much you will need to support the lifestyle that you want once your salary stops
- Review your current pension pot
- Consider making additional contributions to your pension pot while you are still working
Read more in our retirement options guide.
A financial adviser can help you plan to meet your retirement income needs, whether you’re planning on partial or full retirement.
Last updated: 19 May 2015