Just before the Covid pandemic hit, Chris Bore retired at 63. Then in September 2020, he changed his mind and unretired.
For Chris, his retirement at 65 was highly desirable after decades in corporate life, working as a consultant and trainer in DSP (digital signal processing).
It gave him the chance to slow down, spend some time relaxing in the garden and spending time with his two grandchildren Josh and Jess, who live with him in Woking, Surrey. But his brain craved stimulation.
“I was desperate to do something intellectually challenging, so I decided to take a few projects off my son’s hands, who now runs mine and my wife’s consultancy business,” he says.
Chris, now 68, helped with the odd project here and there, and was paid a daily rate for his work. Money was never a big driving force behind his decision to go back to work as he and his wife Sarah, 66, lived quite comfortably off the cash they received from their three lodgers. And although helping out his son, James, certainly scratched an itch, he wanted more.
“When I was a boy, I always wanted to be a primary school teacher – that was my aim the whole time I was at university – but I ended up completing a PhD in the development and medical application of MRI. So, I followed that career path, and I enjoyed it.
“Teaching was a large part of my job, whether that be teaching engineers in industry or master’s students when I was lecturing at Kingston University.”
Chris had always wanted to work with younger kids, however, and as his daughter Jenny had set up a preschool, which he and his Sarah invested in, working there proved a perfect opportunity.
“Not only did this give me a chance to pursue my dream of working with youngsters, but it was also a good financial move for us as we now have the chance to withdraw dividends from the company if we feel we need to.”
Chris started off with a few shifts a week. In January last year, he enrolled in an 18-month Level 2 childcare apprenticeship which would mean he could take on more responsibility at work, once he’d qualified, and get paid minimum wage whilst studying. Chris became an apprentice at the age of 66 and he said it’s “one of the best decisions” he’s ever made.
Chris is not alone. In the UK, more than a quarter (26 per cent) of over-55s are unretiring – doing, or planning to do, some form of paid work in retirement, according to Wesleyan Financial Services.
The company’s research found that although more than a fifth (22 per cent) of those who had retired and who were working, or planned to work, said they were doing so to generate additional income for luxuries like travel and home renovations, a similar proportion (19 per cent) said it was to keep their brain active.
Additionally, just over one in 10 (13 per cent) said they wanted to give themselves a better sense of purpose and more than a third (36 per cent) of those who were yet to retire, but who wanted to keep working said it was because they thought they’d miss social interaction.
What do you need to consider before unretiring?
If you are unretiring, there are several things you need to consider financially before doing so.
The unretirement tax trap
Returning to work can help supplement your income but it could also push up your tax bill.
If you are already taking money out of your retirement savings through an annuity or drawdown or are receiving the state pension, any extra income will boost your earnings and potentially add to your income tax bill if the amount is above the personal tax threshold of currently £12,570.
Nearly two-thirds (63 per cent) of UK over-55s who are working, plan to work, in their retirement haven’t checked if they could be paying higher tax bills by doing so, Wesleyan found.
“Combining salary with pension income could also push you into a higher tax bracket, increasing your tax liability. Note, tax treatment depends on everyone’s individual circumstances and may be subject to change in the future” says Linda Wallace of Wesleyan.
“Also, if you want to continue to boost your pension contributions by returning to work, you may be limited in how much you can pay in, tax efficiently,” she adds.
Pension planning
If you are returning to work with the intention of putting more into your pension, there are some factors to consider.
HMRC will continue to pay tax relief on pension contributions up to age 75, so it may still be worth putting money into retirement savings if you return to work before then.
For those who have purchased an annuity – an income for life – and are considering returning to work, you can start a new pension plan to benefit from further tax relief on your contributions.
But if you have already entered a drawdown agreement, then your annual pension contribution allowance actually drops.
Rather than being able to contribute up to £60,000 into a pension, you would fall under what is known as the “money purchase annual allowance rules” and can only put in up to £10,000 per year.
Tom Selby, director of public policy at AJ Bell, says: “If you are over state pension age, you may need to ask your employer to auto-enrol you. As you get older, there may be other costs you need to plan for, such as paying for long-term care.”
How to avoid having to unretire
You can’t predict what the economic environment will be when you retire, but you can plan by putting as much into your pension as possible.
If you want to stop working, you need to be confident you have sufficient income to pay for your lifestyle throughout retirement, which could be a period of 30 years or more.
Selby adds: “You need to be clear about your living costs and, for those taking an income through drawdown, have a sensible pension withdrawal strategy that won’t run the risk of you exhausting your fund early.”
It is also important to create an emergency fund to act as a financial buffer for unexpected costs and to prevent you having to dip into your pension too early.
Luckily for Chris, his pension pot wasn’t impacted by his decision to return to work as previously mentioned, he relies on the state pension to get by, and the extra income he is now bringing in for luxuries like holidays and meals out.
He says: “Saving for retirement can be a struggle, especially if you do decide to unretire due to the tax implications. Usually at my age, people are dependent on their pension pot to get by, but now I’m working again, I’m hoping to leave my savings alone so my children can inherit the money when I die.
He adds: “If I could give anyone considering an early retirement, or anyone planning to unretire, some advice, I’d say speak to a financial adviser. We’ve had one for years and he’s helped us navigate lots of difficult situations.”