Though many people dream of early retirement, others choose to work well into their later years. That’s because delaying or phasing retirement can offer a range of benefits, even beyond the state pension age.

As life expectancy increases, it’s perhaps unsurprising that the earliest point at which you can claim a state pension (state pension age) has increased too. By 2028 it will increase to age 67 for men and women, and for anyone born after April 1977 the state pension age will be 68 years.

And while some people hold high-powered jobs well into their 70s and even 80s, most people who continue to work want to do so on their terms. This generally means fewer hours, a less pressured role, or something that better reflects their interests and hobbies.

Keep working, your pension will receive contributions from both you and your employer, and continue to grow

Although a significant number of people continue to work into (and beyond) their 60s for financial reasons, others keep working simply because they want to. We take a closer look at the benefits.

- Grow a bigger pension pot

If you keep working, your pension will continue to receive contributions from both you and your employer. This helps you maximise its growth potential. This can be especially important if you haven’t saved enough for retirement and need to build up your savings further.

- Maintain a higher investment risk profile for longer

This means you have more scope to invest in a way that carries more risk, but which also offers the potential for greater returns over the long term. Generally, your pension provider will begin to switch your funds into more stable options (like cash or fixed interest) about 5-10 years before retirement. If you plan to continue working, you can afford to make the switch later and potentially benefit from the higher returns. Do remember, though, that the value of pensions and any other investments, and any income you take from them, can fall as well as rise, and you may get back less than you invested.

- Continue to receive tax relief

Keep paying into your pension, and the government will contribute an amount equal to the tax you would have paid on your pension contributions. This is known as tax relief. The amount of tax relief you receive depends on your income tax rate, but it can be a significant boost to your pension savings.

- Receive a higher state pension

If you keep working beyond your normal retirement age, you can defer taking your state pension by up to 10 years. When you finally retire, you’ll receive a higher income. This can be especially beneficial if you’re continuing to work because you haven’t saved enough and need to maximise your pension income.

Work can provide us with that sense of identity and social connection, which can be especially important as we get older.

It’s not just for financial reasons that people are choosing to continue in the workplace:

- Social and mental health wellbeing

Retirement can often seem like a dream when you’re stuck in the thick of the daily grind, but giving up work abruptly can result in a loss of structure and social connections, which can leave people feeling lost at times.

Adjusting to a new way of life can leave some people feeling isolated and depressed. According to a study in the US published on PubMed Central, almost one-third of retirees develop symptoms of depression soon after retiring. We often forget just how much of our social networks and contacts come from the work environment. Work can provide us with that sense of identity and social connection, which can be especially important as we get older.

- Retain a sense of purpose

Delaying retirement can also help maintain a sense of purpose and fulfilment – something many recently retired people say they struggle with.

You may find you now have the financial freedom, as well as the opportunity, to try something different. Maybe you’ll choose to stay in your current role but on reduced hours that work better for you. Alternatively, you might decide it’s time for a change of career, turn a passion or interest into an income, or even start the new business you’ve always dreamed of doing.

Whatever you decide, many people find that after a lifetime of work, retirement can be a daunting concept, even for those fortunate enough to have substantial savings. Delaying or phasing into retirement may help you maintain that sense of purpose so often defined by a career and work, making the transition a lot easier to manage.

When you choose to retire is a decision only you can make

Delaying retirement isn’t always possible or desirable for everyone. For example, you may have health issues or caregiving responsibilities that prevent you from working any longer. Or you may simply be ready to retire and enjoy your golden years.

The decision to delay retirement is a personal one that depends on individual circumstances and preferences. While there are many positive factors to delaying retirement, it’s important to weigh these against your health, caregiving responsibilities, and personal goals and desires.

Planning your work/retirement balance

If you’re thinking about delaying retirement, it’s essential to put a plan in place as early as you can.

A financial planner will help you understand when you can afford to retire, the income you’ll need to maintain your quality of life and achieve your life goals, and how continuing to work will affect your pension savings. And if you’re planning to start a new business or explore new career opportunities that align more with your passions and interests, they’ll help you crunch the numbers to determine what might be possible.

Ultimately, delaying retirement can be a fulfilling and financially sound decision for many people. By planning ahead, you’ll be able to strike a balance between your financial needs and enjoying the benefits of continued employment well into your later years.

Get in touch

To speak to us about your retirement goals, or to arrange an appointment, call 0800 915 0000, or alternatively use our contact form here.

Phased retirement Retirement The basics