Thinking of “unretiring”? Here are 3 factors to consider

An older man sits on a sofa and works on his laptop.

Have you recently retired and found yourself missing the habits, routines, and sociability of working life? Or do you wish you had put aside just a little bit extra to fund your retirement years?

If you have already retired but feel that your wellbeing or finances would benefit from returning to work, you might want to consider “unretiring”.

Figures from the Office for National Statistics (ONS) show that, from April to June 2022, the number of people aged 65 and over in employment increased by a record 173,000 to 1.47 million, which is also a record level.

So, what’s behind this trend? And what should you consider if you are thinking of unretiring?

Reasons for unretiring

There are two primary reasons that you might decide you want to “unretire”.

Boost your income

Actuarial Post reports that almost 1 in 5 (18%) UK pensioners say their quality of life is going to deteriorate because they don’t have enough money in their pension. 

Over the last couple of years, you will have likely seen your expenditure rise. Inflation hit a 40-year high, driven by soaring food, energy, and fuel prices. Moreover, during the cost of living crisis, returns on savings accounts were generally not keeping pace with rising costs. 

Returning to work can help you to generate a steady income and may also boost your pension savings. 

Firstly, you may be able to make contributions from your earnings to boost the value of your pension. Furthermore, if you are employed, your employer may also add employer contributions, which combined with tax relief could provide a big increase in the size of your pot. 

Unretiring also means that you delay drawing from your pension and reduce the number of years you will need it. So, when you do come to access your pension, your lifestyle might be more comfortable as you may have more money to fund fewer years.

Mental health and wellbeing

Since the introduction of the Basic State Pension in 1948, life expectancy has risen out of step with the pension age, meaning people’s retirement years often last a lot longer. 

If you choose to retire at the current normal minimum pension age of 55 (due to rise to 57 in 2028), you are likely to be in retirement for around 30 years on average.

While this has important financial implications, there are also wellbeing issues worthy of consideration.

When you leave work, you may find that your job formed your sense of purpose, routine, possibly even your identity. It may have given you a social life and the feeling of being part of a team.

ONS figures show that 46% of people aged 50 to 65 who left or lost their jobs during the pandemic due to their physical or mental health want to return to work, either for the social company or for the enjoyment of the job. 42% said returning to work would improve their mental health.

So, with potential decades of retirement ahead of you, you may consider unretirement if you are yearning for the wellbeing, support, and structure that came with your work.

3 factors to consider before unretiring

1. Your work-life balance

Unretiring could disrupt the work-life balance you worked hard for decades to achieve.

There are likely things you dreamed of doing when you reached retirement. From spending time with grandchildren, to travelling the world, unretiring could limit your capacity to do everything you had planned.

Alternatively, you may find that too much free time leaves you longing for work, as you saw above. You might want to explore semi-retirement or part-time working options so you can continue to work while enjoying more free time than you had before you retired.

2. Changes to the Money Purchase Annual Allowance

As you read earlier, unretiring may help to boost your pension fund if you make further contributions from your income.

However, if you have already flexibly accessed your pension, or you decide to supplement your income by flexibly drawing from your defined contribution (DC) pension, you may face a restriction on the amount of annual pension contributions you can make tax-efficiently.

The Annual Allowance is the maximum amount you can contribute to your pension in a single tax year without facing an additional tax charge. For most people, the Annual Allowance is £60,000 in the 2023/24 tax year or 100% of your earnings, whichever is lower. This includes money you contribute in addition to any contributions made by your employer and tax relief.

Once you begin accessing your DC pension flexibly, the Money Purchase Annual Allowance (MPAA) kicks in and reduces the £60,000 Annual Allowance to £10,000. 

So, if you choose to unretire and you have flexibly accessed your pension, it could affect the tax efficiency of any further pension contributions you want to make.

3. The abolition of the Lifetime Allowance

Until 2023/24, the Lifetime Allowance (LTA) was a limit on the amount of pension savings you could accrue in your lifetime without paying an additional tax charge when you came to access them. 

The LTA is set to be abolished in April 2024.

Without the LTA, you can continue to build your pension fund without the worry that you’ll face an additional tax charge when you come to access it.

So, if you are considering unretirement, the abolition of the LTA means you can continue to grow your pension pot without being liable for extra tax, even if you were previously close to the limit. 

Get in touch

If you are thinking of unretiring for either wellbeing or financial reasons, we can work with you to build a plan based on the income you’ll need to support the lifestyle you want. 

To find out more, email or call us on 01189 876655.

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.