Are you thinking about picking up some work after retiring? Perhaps you are even considering a full return to the workforce. In 2025, many people are considering “unretirement” in some form – some out of necessity, others out of choice.
In this guide, our financial planners explain the nature of unretirement, the financial implications involved and some practical steps to discuss with your adviser. We hope these insights are useful. Please contact us if you want to speak with one of our Burnley financial advisers.
What is unretirement?
Unretirement is a relatively new trend in Western societies like the UK. In simple terms, it is the process of returning to work after someone starts claiming their pension(s).
For instance, a fully-retired person (aged 69) might choose to pick up a full-time job in their old industry, start a business, or pick up some shift work at a local college or supermarket.
There are many reasons why someone might choose a form of unretirement:
- Financial need. Perhaps inflation and living costs have become too high. Insufficient retirement income can drive retirees back into the workforce.
- Health and activity. Retirement can be an immobile experience for many people. By working part-time or volunteering, retirees can keep mentally and physically active.
- Purpose and structure. Employment often provides a sense of identity and routine.
- New opportunities. It is never too late for something new to come your way. Consulting, self-employment or new career paths may appeal more after retirement.
Am I allowed to return to work after retiring?
Yes! No law prohibits someone from picking up paid work after claiming their State Pension or other pensions. However, certain formalities and implications need to be observed.
In particular, once you reach State Pension age (66 for men and women in 2025), you can start claiming your pension and continue to work. You do not have to stop; there is no cap on your earnings. However, if you want to carry on in paid work, one option might be to defer your State Pension. For every 8 weeks you defer, your State Pension income rises by 1%.
Deferring the State Pension can be prudent for some people. However, for others, it might not make sense. One particular consideration is your expected lifespan. In general, it takes about 17-20 years to reach the breakeven point for deferring one year.
Another consideration of unretirement is your workplace (and private) pensions. Once you start drawing from a pension pot, you usually trigger the Money Purchase Annual Allowance (MPAA). If you have done this, then bear in mind that your tax-free contribution limit for pensions will now be £10,000 per year (down from a maximum of £60,000).
This could inhibit your ability to boost your pensions further if you return to work after retiring.
The financial considerations of unretiring
Returning to work could have implications for your tax bill. For instance, if you currently receive pension income totalling £40,000 per year, then your highest marginal rate will be the 20% basic rate. However, if you take up a corporate job paying a £50,000 salary and continue to receive your State Pension, this would push you into the 40% higher rate.
A rise in income would likely be welcome, of course. However, moving into a higher tax band can have knock-on effects elsewhere. For instance, moving from the basic to the higher rate cuts your Personal Savings Allowance (PSA) from £1,000 to £500. So, if you were planning to build up your savings by returning to work, you may need to discuss your savings strategy with a financial adviser to ensure tax efficiency.
Also, please note that you are not required to pay National Insurance (NI) after reaching your State Pension age. So, if you start working again after retiring, make sure you check payslips so you are taxed under the correct PAYE code.
Conclusion & invitation
Before leaping into unretirement, start by understanding why you want to return to work. Is it for income, social interaction, mental stimulation or a mix of these?
Consider speaking with a financial adviser to find potential outcomes. In some cases, solutions to financial issues can be identified without returning to work. Check how re-employment will impact your pension, tax situation and benefits.
If you decide unretiring is right for you, write a list of pros and cons for your options – e.g:
- Part-time work: A limited number of hours for better work-life balance.
- Consulting/freelance: Use your experience to help businesses on a contract basis.
- Self-employment: Turn hobbies or skills into income.
- Volunteering: Unpaid roles for purpose and community involvement.
We hope these insights on unretirement have informed and inspired you. If you want to ensure you’re taking the right steps to safeguard your financial future, please get in touch. We’d love to discuss your goals with you!
Please note:
Your capital is at risk. Investments can go down as well as up. Past performance is not indicative of future results. Tax treatment depends on individual circumstances and may change. This content is for information only and not investment advice. Any decision to invest is the reader’s own. Diversification is key to managing risk. Market volatility affects investment values. Inflation erodes savings. Liquidity risks may prevent quick access to funds.
