Working retirees cautioned re pension contributions
8 November 2017
As five million over 50s say they plan to continue working after retirement, this could see them fall foul of tax laws, new research by Retirement Advantage highlights.
Research carried out on over 50s retirement plans showed that 49% want to continue working in some capacity after reaching retirement, with 43% planning to work part-time, while 6% anticipated that they would continue to work full time.
According to Retirement Advantage, if half of those turning 65 this year chose to stay in work they would contribute £7 billion annually to the UK economy – £1.6 billion from those working full time and £5.4 billion from part time workers.
Andrew Tully, pensions technical director at Retirement Advantage, said: “The idea of cliff-edge retirements are put firmly in the past as half the over 50s have no plans to fully retire when the time comes. This generation will continue to make a significant contribution to the economy in the future and employers will need to consider how best to adapt to this changing employment landscape.”
Despite financial woes often cited as the key driver behind a longer working life, 54% of respondents said they would consider working longer simply because they enjoyed working. The second biggest reason was to retain a sense of purpose, closely followed by a desire to avoid boredom. Needing the extra income was the fifth most popular reason, with 41% listing this as the driver.
Tully continued: “People clearly enjoy the social aspects as well as financial benefits of work, but there is a cautionary tale in these statistics. A significant minority do not plan to ever stop working, with the number increasing over the last year. This may be perfectly reasonable for some people but it may also reflect a growing pressure to work to be able to pay the bills.”
However, remaining in work past retirement could impact pension savings. A survey conducted by Censuswide earlier this year revealed that 37% of working people using the freedoms to access cash from their pensions have continued to pay into a pension, while 19% say their employer has. Worryingly, 67% of these people are completely unaware of the Money Purchase Annual Allowance.
Tully added: ‘People gradually easing into retirement by working part-time may also have taken some of their pension benefits and could find themselves falling foul of the tax rules. Our research shows there is very little awareness of the MPAA which severely restricts the amount you can continue to pay into a pension once benefits have been taken.”
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