Ideas for everyday living

I went back to work to make ends meet

Why one retiree returned to work to top up their pension – and what to do if you’re facing the same.

One consequence of the pandemic was record numbers of over-50s taking early retirement after rethinking how they wanted to live. Fast forward a year, and the rocketing cost of living has forced many to reverse that decision. But they’re not returning to work to pay for nice extras such as holidays and cars; many are going back to pay for life’s essentials.

But can you just decide to go back to work once you’ve retired? How does it affect your pension and tax situation? And what will it mean for your wellbeing?

“I was managing OK, but then my relationship ended – and I hadn’t expected the cost of living to rise as much as it did”

– Trevor Bennett, 73

Trevor Bennett, a 73-year-old builder from Folkestone, faced these questions when life events forced him to change his plans. He first retired just before the pandemic. The timings worked out well for lockdown, but once things started to return to normal and prices began to climb, he faced a difficult decision.

“I was picking up a state pension and managing OK, but then my relationship ended. It wasn’t something I’d planned for – and I hadn’t expected the cost of living to rise as much as it did.”

As well as his state pension, Trevor also has a small income from a flat he lets out, which took him over the tax-free Personal Allowance of £12,570 per year. Even with both incomes, returning to work was necessary. “After the loss of my ex-partner’s financial contribution, I didn’t have a choice,” he says.

“I’ve always liked my job as a builder, and it was easy to get back into a self-employed role. Even with costs such as work insurance and having a van, financially, a return to work was the best option.”

Although this gave him much-needed funds, the change has come at some cost to Trevor’s wellbeing.

“There’s lots of heavy lifting, and that feels different in your 70s to your 50s. My health hasn’t been the best this past year either,” he explains.

But Trevor says there are upsides, too.

“I can generally pick which jobs I take on, and it’s nice to meet interesting people. It also gives you a sense of purpose and some routine. But if I had the choice, I’d rather I could afford to retire properly and spend more time with my kids and grandkids.”

Returning to work? Here’s what to consider

NatWest pension experts Sean Rabbitt and Gaurav Gupta explain how returning to work could affect your pension and tax situation.

Most people have a Personal Allowance of £12,570 per year, which is the amount you can receive through a pension, investments or earnings before you start to pay tax. This threshold is frozen until April 2028.

If you’re returning to work, remember that extra income could push you into paying tax, or into a higher-rate tax band. So when budget planning, make sure you factor in any Income Tax, as this will reduce the incoming money you might have expected.

If you have a flexible income from a private pension, it may be worth changing the monthly amount so that it meets your needs and suits your tax position. But you should take advice on this before going ahead.

Of course, if you do go back to work, you can also pay into a new pension scheme and get tax relief on those contributions up to age 75. A workplace pension will offer employer contributions, too.

And there’s some good news from 6 April 2023 – if you receive a state pension, the government has confirmed it will increase by 10.1% in the 2023/24 tax year. The full new state pension will rise from £185.15 to £203.85 per week (£10,600 per year); the old state pension will go up from £141.85 to £156.20 per week (£8,122 per year). Check your pension eligibility at gov.uk.

If you’re considering any of the above changes, we’d always recommend talking it through with a financial or tax advisor.

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Anna-Louise Dearden

Anna is a journalist who writes about all things affecting people’s happiness, including money.

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