Working After Pension Age

It now seems that many of us will have to work past State Pension Age to enjoy the quality of life we would like.

An older woman working as a telephonist.If you choose to carry on working, your earnings will not reduce the pension you receive. However the combination of earnings and pension will increase your taxable income. So, if you are working and paying tax, your tax code will be adjusted to take into account the amount of pension you receive.

Once you reach State Pension Age, they do not have to pay National Insurance Contributions (NICs). You will need, though, to complete an ‘age exemption’ certificate and give it to your employer. The certificate (CA4140) is available from The Pension Service, telephone 0845 601 8821.

When you reach State Pension Age, you can choose whether or not you want to draw or defer your State Pension. There are various options available to people, for example they can draw their pension and either stop working or continue to work, or can defer their pension and continue or stop working.

State Pension and Income Tax

You are likely to have more than one tax code if you have:

  • Two or more jobs at the same time
  • Income from two or more pensions
  • Income from a pension and a job

Therefore, retired people and those working past retirement age could well have more than one tax code and, if you do, check your codes carefully to ensure you are paying the right amount of tax.

If you are taxed at basic rate (20%), you will be given a ‘BR’ code for your second job or pension, meaning all income from their employment and/or pension will be taxed at the basic rate.

If you are taxed at the higher rate (40%), you will be given a ‘D0’ code for your second job and/or pension and will be taxed at the higher rate.

Please note that you may move tax brackets and be liable for higher rate tax if you continue working whilst claiming your state pension. Your income is increased but you will be taxed at the same rate on your first and second job and/or pension.

Related Information

The Governmental website, GOV.UK, has advice on planning for your retirement.

 

Further Information

For detailed information, contact the Pension Advisory Service directly.

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