Reasons to keep working
Our Future of Retirement report states that 45% of people in the UK think that having work you enjoy is extremely important to a happy retirement. Jackie Watson is one of those people. A retired teacher, she now concentrates full-time on the livery and horse-riding holiday business she runs with her daughter, Melissa.
Jackie's reasons for working match those of many retired people. "All my former colleagues are doing other jobs since they retired, too," she says. "It's a mixture of necessity and choice. They need to work to augment their pensions, and some are combining their interests with work."
Continuing to work after you retire can have other benefits too.A recent Public Health Review paper shows that older people who have temporary or part-time jobs are in better physical and mental health than those who give up work altogether. And working after you're retired can give you mental stimulation and keep you engaged with the wider world.
If you're not sure whether you'll need to work after you've retired, you can check your probable pension income with our Living in retirement tool.
"You may be able to take a job you love, even if it pays less."
What work to choose
There is now no default retirement age, so in many cases you get to choose when you retire. But as the earliest age you can get your state pension is increasing, you should calculate your state pension age to see if you have the option of taking up your state pension and continuing with your current job.
You might find that work after retirement can offer more freedom than your previous working life. You may be able to take a job you love, even if it pays less, work part time, or run your own business.
You may also be able to give other businesses the benefit of your experience by working in a consulting capacity, possibly from home.
However you earn, you can supplement the income with your pension – and you can even defer your pension to potentially get a bigger income later on.
Although she gets up at 5am and works 15 hours a day, Jackie says she loves every minute of it. "I'll never retire. It will take illness or an accident to make me stop."
Working after retirement and tax
If you're thinking about working after you retire, you need to consider what effect it will have on the amount of tax you pay.
Once you've reached state pension age, the amount you can earn without paying Income Tax (your personal allowance) becomes more generous. You also no longer pay National Insurance. But you if your taxable income – including your pension – is above your personal allowance, you'll still pay tax.
If you're aged 65-74, your personal allowance is £9,940 (for the tax year 2011-2012). If you're aged 75 or over, it's £10,090 (for the tax year 2011-2012). But if your income exceeds £24,000, these allowances are reduced.
Planning for the future
Jackie is 68, and in great health. She expects to last another couple of decades, but that hasn't stopped her from planning ahead.
"I have made a will, of course, and it is quite straightforward because I want everything to go to my daughter," she says. "I have already given her some assets, so she has a nest egg."
The rise in property prices means that Jackie is concerned about inheritance tax, so when making her will she got advice on the reliefs available for business assets.
The value of tax treatment will depend on your individual circumstances and may be subject to change in the future.
As with most investments, the value of pensions may fall as well as rise, meaning you may get back less than the amount you invested. Funds are not normally accessible until you take your retirement benefits.
