Retirement doesn’t necessarily mean closing the door on employment, as it can provide the opportunity to start a new working life, albeit part-time.
In this guide we explain why you should consider your pensions, benefits and rights when you work part-time in retirement.
If you’re not ready to fully give up work when you reach retirement age, you’re not alone.
Around 36% of part-time workers are aged 50 plus, and the number aged 65 plus has doubled in the last six years, thanks, in part, to employment laws that prevent employers from forcing their staff to retire when they reach State pension age.
In fact, your employer cannot force you to retire unless there is a valid reason for doing so, such as lacking the necessary level of physical fitness to do your job.
Continuing to work - though perhaps scaling back your hours - may be an attractive option, especially if the thought of endless hours of leisure time terrifies you or you need the extra cash.
Dispelling pension myths
Part-time work and pensions
The State pension and most private pensions are far more flexible than you might think. You can defer taking your State pension and, if you have one, a defined-contribution personal or workplace pension.
Alternatively, you can draw on these and continue working – the choice is yours. Any amounts you draw will count as income, meaning you will incur tax on any income above your annual personal allowance. Whereas, if you defer your pensions, it will have more time to grow, giving you a better retirement later on.
When you start working part-time, you should be offered the chance to join your employer’s workplace pension scheme and, similarly, you should be free able to continue contributing to a workplace pension if you switch from full- to part-time work.
Increasingly, employers are being required to automatically enroll staff aged between 22 and State pension age on a workplace pension. This is a convenient way to boost your pension, and well worth sticking with, if your employer auto-enrolls you.
Note that you won’t be automatically enrolled if you don’t meet certain eligibility criteria, such as if you are under State pension age.
Read our guide to pension auto-enrolment
No more National Insurance contributions
If you earn more than your Personal Allowance, which is £11,000, you will be liable for income tax. However, the good news is that you no longer pay National Insurance contributions once you reach State pension age – even if you continue working.
Of course, mistakes can happen so it is a good idea to give your employer proof of your age and check your pay slips to ensure deductions aren’t being made. You can also get a certificate of age exemption that authorises employers not to deduct National Insurance contributions by calling HMRC on 0845 302 1479.
How to check your National Insurance contributions
Part-time work and your benefit entitlements
If you choose to work part-time in retirement, some of your benefit entitlements may be affected. For example, you may no longer be entitled to Pension Credit if your weekly income rises to more than £155.60 (£237.55 for couples).
Deciding to claim your State pension can also affect your benefit entitlement, so it’s best to speak to a pensions expert if you are worried about this issue. Housing Benefit and Council Tax Benefit may also be affected.
It’s worth remembering that eligibility for the means-tested Working Tax Credit changes at age 60. To qualify at this age you must work at least 16 hours a week – down from 30 hours a week.
Read more about benefits in retirement
Your rights as a part-time worker
Part-time workers cannot be discriminated against and must be treated the same as their full-time colleagues. This means they should be on the same pay scale – albeit on a pro rata basis – and be entitled to sick pay, maternity, paternity and adoption leave and pay.
The benefits don’t end there, as part-timers should have access to career development opportunities, including training, and have an equal chance of being considered for promotion or even redundancy.
Also, all part-timers are entitled to be paid at least the Minimum Wage, which is currently £7.20 an hour for those aged 21 and over. Employers who fail to pay the Minimum Wage are acting unlawfully.
Differences between part- and full-time workers
Although part-time workers are protected from many types of discrimination, employment law issues can arise from time to time.
Bonuses are a potential problem, as there is no requirement for a part-time worker to receive the same blanket bonus as their full-time colleagues. However, if they work half the number of hours a full-timer does, they can expect half the equivalent full-time bonus.
When it comes to workplace benefits, an employer can offer the likes of dental or health insurance to full timers, but not part-time workers, providing they can reasonably justify this. For example, they may not have to if the cost of providing the benefit outweighs any benefits the part-time worker could reasonably expect to receive.
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