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Money & Rights

The gentler route to retirement

Pre-retirement, where people gradually scale back on work or change jobs rather than stopping altogether, is becoming the reality. Teri Harman investigates

Many people who were planning to retire are now considering working past their State pension age, according to research by Prudential. However, just nine percent say they would continue full-time in their current job, while 28 percent would prefer to cut their hours with their current employer, and a further 29 percent would look for a new employer altogether.

The reasons for working beyond retirement age are not exclusively, or even primarily, financial. A third of those considering working past State retirement age want to do so because they enjoy it, and a further 34 percent say they do not feel ready to retire.

Meanwhile, and entrepreneurial one in five hopes wither to start a new business or earn some money from a hobby; only 8 percent say that can't afford to retire.

The research also shows that those who are delaying retirement because they can't afford it feel they are unlikely to be able to give up work completely until they are 70, This is in stark contrast to 64, which is the average age at which they would ideally have preferred to retire.

The annual study that Prudential carries out into the finances and hopes of those planning to retire in the year ahead is now in its tenth year, and this is the fifth consecutive year that more than half dais they will consider working beyond retirement age.

However, while winding down, rather than retirement being a single moment in time, may be the aspiration for older people, how realistic is it to carry on working reduced hours for your current employer find another job in your 50s or 60, earn money from a hobby or start a small business?

Staying with your current employer

So-called default retirement age (the age at which your employer could trust you retire) was abolished in 2011, so you cannot be made to stop work unless you wish to. There are some exceptions- for example, if your job requires a level of physical strength that you no longer possess. Your employers can also make you redundant, but they cannot use age as a determining factor in this decision.

The Equality Act 2010 makes it illegal to discriminate on the grounds of age, too, so if you feek that you have been unfairly treated because you are older, you may be able to take your employer to a tribunal. All of this should mean that, if you want to carry on working in your current job when you reach State retirement age, it is easier for you to do so.

You are not obliged to discuss your retirement plans with your employer, but you may wish to, especially if you work for a small firm as they will of course have an invested interest in your plans. However, you should not be put under pressure to make a decision.

Find out about the rules of your company pension scheme. With some schemes it is possible to take your pension and continue drawing a salary from the same company.

If you don't want to start taking your company pension (or the scheme does not allow it) you need to know whether your employer will continue to contribute to the scheme on your behalf (many don't).

Either way, there is nothing to stop you from paying into a private pension beyond retirement age, or alternatively, with the relaxed rules on pension withdrawals you might want to take just some money from a personal or defined contribution pension to supplement your reduced earning.

Vince Smith-Hughes, a retirement expert at Prudential, says: "One of the real benefits of the pension freedoms is they allow people to tale money from their pension to sop up earning from a job or self-employment, or from their State pension, potentially giving them three sources of income."

However, he warns that people need to be aware of the tax implication. "If you have income from different sources, keep an eye on the tax bands as taking too much can push you into the higher rate." (Earnings over £45,000 in 2017/18 will be taxed at 40 percent)

Another potential tax implication is going through Parliament at the time of writing. Over-55s who have already drawn out more than the 25 percent tax free lump sum from a pension may e restricted to a new contributions cap of £4000 a year into any other pension schemes they may still have. It is expected this rule will be applied retrospectively to April 2017.

As for your State pension, you can claim this and continue working bit you might prefer to defer it, especially if taking it would put you into a higher tax bracket. If you defer your State pension, you will receive an increase of 5.8 percent for every full yea of deferral (meaning you have to live for 17 years to benefit from a decision to defer for a year).

Once you reach State retirement age, you no longer have to pay National Insurance contributions, even if you continue working full time.

Working fewer hours for your current employer may also be something you can negotiate. Although employers are not legally obliged to offer this, it seems more and more are realising that bu being flexible they may get to keep reliable staff on, albeit part time, perhaps into their 70s. That way, they benefit from their experience but without having to shell out a large salary.

Flexible retirement can not only offer fewer hours, but also possibly a lower position in the company which would mean less stress and a better work/life balance. It may be down to you to make a case for this gradual easing into retirement, and there may be some jobs that are less suited to such an arrangement, but it is definitley worth negotitating if this is what you would truly like to do.

Finding another job

Finding another job in your 60s isn't easy but that doesn't mean it's impossible. the government estimated that by 2033 more than a quarter of the UK population will be over 60. With State retirement age due to rise to 68 between 2037 and 2039, employers can no longer afford to ignore this age group. 

There is a lot of help available for older people seeking work, from specialist websites and agencies to charities sch as Age UK, which help older people spruce up their CVs and prepare for job interviews. The government has even appointed a Business Champion for Older Workers- Avivia chief executive officer Andy Briggs. A group of companies including Aviva,, Barclays, the Co-Operative Group and FSCS (Financial Services Compensations Scheme), are committed to employing 12 percent more older workers by 2022, while others such as Sainsbury's and B&Q have long prided themselves on a policy of employing more older workers.

Starting a small business or making money from a hobby

22 percent of self employed part time workers are 65 or over, according to the Office for National Statistics, and older people are far more likely to make a success of a start-up than younger counterparts. You will need to register as self-employed with HMRC and any profit you make will be added to you other income and be liable to tax. Again there is a huge amount of advice available.

For our columnist Neil Patrick's take on pre-tirement, click here

Are yu planning a pre-tirement? Do you have any advice to share?

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