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Can I carry on working after retirement?

Retirement | Pension Rules Helpful? 7

Asked by Portage, submitted 21 January 2011.

Open Quote Can I continue to work part time after retirement and if so how much am I allowed to earn without affecting my pension?End Quote

Answered by Justin on 23 January 2011

One you reach state pension age you'll be paid whatever state pension you're entitled to, regardless of whether you carry on working. And if you do continue working you'll no longer have to pay national insurance.

However, there are a couple of things to be aware of:

- If you don't carry on working and have little/no other source of income other than a basic state pension then you might qualify for a 'pension credit' - effectively a state benefit that ensures you receive at least £132.60 a week (including the £92.60 state pension). You might also receive a further £20.52 weekly 'pension savings credit'. Carry on working and it's unlikely you'll receive these (although if you have other pension/savings/investment income you probably won't anyway).

- When you reach 65 the annual amount you can earn before paying income tax rises from £6,475 to £9,490 - called an 'increased age allowance'. However, this falls by £1 for every £2 you earn above £22,900, so if continuing to work pushes your income above this limit you'll effectively pay more tax - equivalent to 30% on income between £22,900 and £28,930. See this previous answer for more info.

You don't have to take your state pension at retirement age. It's possible to defer it and receive either a higher weekly pension in future or a lump sum equal to the deferred payments plus interest. For full details read this earlier answer. You can normally defer other pensions too, although your future pension might be affected by investment performance and annuity rates, i.e. there could be some risk in doing so.

So yes, you can carry on working. Just bear in mind the above to make sure it's worth your while.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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