More people plan to work past traditional retirement age. Here’s what they need to consider

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More people plan to work past traditional retirement age. Here’s what they need to consider

by RMI Independent Financial Advice Category: News

Figures suggest that an increasing number of people plan to work past the traditional retirement age. There are a variety of reasons for doing so and it also could help secure your long-term finances. If it’s something you’re thinking about, there are some things you need to consider.

Almost half of over-50s expected to be part of the workforce by 2030

According to Legal & General research, the number of over-50s in work has increased by 36% in the last year. The rise has been driven by an increase in the number of people in their 60s living and working for longer. It’s not a trend that’s expected to go away either; by 2030, it’s estimated that almost half (47%) of over-50s will be part of the workforce.

Even with the State Pension Age rising, more people are working beyond this point. The report suggests 8% of people over the age of 66, the State Pension Age in 2021, are in work. By 2030, this is expected to rise to 11%. That would be the equivalent of 948,000 people working while being above the State Pension Age.

The research found that finances are playing a role. Some older workers want to boost their pensions and other savings to secure their desired retirement income. The gender pay gap and changes to women’s State Pension mean more women are working for longer too. For others, working longer can provide purpose and a routine that they want to retain. Whatever your reason, if you choose to work past the State Pension Age, there are some things you should consider.

5 questions to consider if you plan to work past the State Pension Age

1. What are your long-term plans?

While you may not be ready to retire yet, setting out a long-term plan is still important. When do you want to retire, and what retirement income will you need? Your plans don’t have to be set in stone, but having an idea of when you want to retire and the lifestyle you want can ensure you stay on the right track.

2. Will you still access your pension?

You don’t have to give up work to be able to access your pension. Usually, you can access your pension from the age of 55, rising to 57 in 2028. This includes often being able to take a 25% tax-free lump sum. You can earn a salary and withdraw an income from your pension if you wish to. However, keep in mind that it could affect your retirement income in the future. It could also increase your Income Tax liability, and potentially push you into a higher tax band. Make sure you’re aware of the impact before you make a withdrawal.

3. Will you continue to contribute to your pension?

If you’re hoping to boost your retirement income, you may still want to contribute to your pension. This can help your money go further and provide you with a larger pot to draw from when you do decide to give up work. Usually, your Annual Allowance, the amount you can place into a pension each tax year while benefiting from tax relief, is £40,000 or your annual income, whichever is lower. If you’re a high earner, your Annual Allowance may be lower. However, if you start taking an income from your pension, you may trigger the Money Purchase Annual Allowance (MPAA), which will reduce the amount you can tax-efficiently save to £4,000. It’s important to be aware of your allowance so you don’t exceed the threshold.

4. Will you claim your State Pension?

If you’re working past the State Pension Age, you may want to defer claiming your State Pension. For every nine weeks you defer, your State Pension will increase by 1%. This works out at just under 5.8% if you deferred for an entire year. As well as a higher State Pension when you do claim it, deferring your State Pension if you’re still working can reduce your Income Tax liability.

5. Can you create the work-life balance you want?

Pensioners have far more freedom today to create the lifestyle they want. You may not be ready to give up work completely, but do you want to strike a better work-life balance? You may want to reduce your working hours and supplement the lower salary by taking an income from your pension, for example. If you’re not sure what your options are, we’re here to help you.

National Insurance hike will affect workers past State Pension Age

In the past, people working beyond the State Pension Age have been exempt from paying National Insurance contributions (NICs). However, a hike announced by the government will now affect this age group.

From April 2022, NICs will increase by 1.25 percentage points. From 2023, this additional tax will become a separate “Health and Social Care Levy”. The levy will be paid on all income earned, meaning those working beyond State Pension Age will also be charged. While the charge can seem relatively small, it means those working past the traditional retirement age will see their pay affected by National Insurance for the first time. It could mean your take-home pay is lower than expected, so it’s something you should keep in mind when planning your finances.

If you’d like to discuss working past retirement age, from whether to access your pension to how to create the work-life balance that’s right for you, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

What our clients say

I was recommended Paul and Bryony as financial advisers by a friend. My husband and I were particularly interested to think about where to invest our savings. They have helped us to think about what level of risk we are prepared to engage with and explained the different possibilities very clearly and thoroughly, enabling us to maximise the potential of our investments. They also provide regular updates. We have been very pleased with their service and have already recommended them to others.

Dr C Oliver

London

I have been a client of RMI since their foundation. Prior to that, I dealt with the directors for my own personal pension and our business pensions. This relationship as existed for the last 25 years. During this time, I have received first-class support and advice. I have always been kept informed on financial trends and opportunities. To this end I was able to plan retirement early if I wished. More importantly, I was able to choose the right opportunity as when to retire. Since retiring, I continue to receive the highest service and advice on fund management.

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Ex General Manager

Leicester

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Ex Non-Executive Director, Earl Shilton Building Society

Leicestershire

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Ms M Topham

Oxford

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Mr & Mrs S Price

Devon

Following a personal recommendation from a colleague some two years ago, Bryony and Paul provided advice to my wife and myself on planning for my forthcoming retirement. Latterly they have helped another family member on how best to invest a lump sum inheritance. On both occasions, they have guided us through the various options available, indicating the pros and cons in an easily understandable way. They continue to provide regular updates on how the investment is performing. We have always found them to be attentive, knowledgeable and a pleasure to deal with. We would have no hesitation in recommending them to a friend seeking an adviser.

Mr & Mrs P Teasdale

Rutland

When you are investing, you need confidence to make decisive commitments. Paul Eason and Bryony Evans at RMI are true professionals that you can trust implicitly for commercial and personal advice and transactions.

Mr D Matthews

Chairman, Cellular Mouldings Ltd

Northants

RMI not only deal with all our company's employee benefits schemes, but also provide invaluable support for us on a personal level. Nothing is too much trouble and we have found their service to be effective, efficient and friendly. We would recommend RMI to any company or private individual looking for a comprehensive and personal service.

Mr & Mrs I Bates

Ex Directors of The Bright Consultancy Ltd

Bournemouth

Paul and Bryony have advised us for over ten years. They bring strong market knowledge and analysis to provide balanced views for investment decision making. This is then backed up by thorough administration - all delivered in a professional and easy-going manner.

Mr & Mrs I Morton

Concept Shape Ltd

Cheshire

RMI Independent Financial Advisers have been assisting our clients with knowledge and insight into the world of pensions and protection for over 10 years. They have helped many of our company and personal clients navigate their options and meet the legislative duties around pensions and auto-enrolment in the most efficient way, whilst giving them the confidence to plan effectively for their future. We have no hesitation whatsoever in recommending their services to not only our clients, but to other professional connections.

Sunflower Accounts Ltd

Accountants

Wiltshire

Paul has been a trusted adviser to our business for over 20 years and he and Bryony continue to support us with our company pension scheme whilst providing first class financial advice. We would highly recommend RMI for anyone seeking a quality financial advisory service.

Mr J Turner

Managing Director, LINAK UK Ltd

Birmingham

I was looking at my potential retirement options and RMI were able to come up with a bespoke pension solution that enabled me to retire earlier than I had expected.

B Kilfeather

Not knowing how to plan for the future, I required advise about pensions and insurance policies and Paul has helped by being constantly available, calm and pragmatic.

Dr R Singh

Director

Paul was recommended to me by one of his clients and I was looking for a financial adviser who could help with a pension scheme for my employees and also for my personal plan.

Paul helped all the members of my team. He had time and patience and everyone individually with their various circumstances. He was also very helpful with my personal pension during the time I have my business. My personal circumstances have now changed and Paul’s advice has been invaluable.

D Harrison

Business Owner

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