Delaying your retirement

Once upon a time, it was simple: when you reached a certain age, you retired. Now it's not so black and white, and it can mean that you have a number of questions. Should you or could you consider delaying retirement? What will retirement change in your life? Read on to find some helpful suggestions and answers to some of the most common questions.

Do I have to retire straight away? 

The law has changed. Now, unless there is a valid reason - for instance for yours or another persons' safety or if your occupation is subject to a compulsory retirement age - no one can make you retire when you reach 65, 70, or even 80. For some people, delaying their retirement past the 'normal' retirement age might be a benefit financially as well as emotionally. For others, reaching 60 or 65 is something they've dreamed of. You are much more in control of when you retire now, than in previous years.

Can I go part-time?

How quickly you retire will depend on you and your employer. It may be possible to go part-time, depending on your circumstances, it may not. But for many people, working reduced hours is an excellent way to make the transition into retirement, without it being so final.

Do I have to take my State Pension straight away?

Not if you don't want to. The UK Government do not insist that you claim your State Pension straight away – even though it decides your State Pension Age.

What happens if I delay taking my State Pension?

In short, if you put off taking the State Pension then you'll get a slightly higher amount. As of 6 April 2016, you'll get an extra 1% in your pension for every nine weeks you delay – which is an increase of almost 5.8% for every full year you put off making the claim. Here's an example of how this would affect you under today's new State Pension. 

  • If you are entitled to the full new State Pension amount you get £164.35 a week. 
    Over the course of a year this works out at £8,546.20

  • If you decide to defer for one year, you'll get an extra £493 a year.
    This works out at just under 5.8% of £8,546.20

The State Pension will also increase each year under current legislation. But it's worth thinking very carefully about whether you can afford to delay receiving your State Pension, particularly if you are relying on that money for basic needs such as food and heating.

What about my private pension, or company pension? Do I have to take that immediately?

Possibly not, and you should consider the risks involved. Some pensions offer a guaranteed annuity rate for example, which may be connected to a specific retirement age, but the longer you leave your pension pot invested the more time it has to grow. As a result, it could give you a higher income and, in general, the level of annuity income you'll be offered should also increase the older you are. Obviously there are no guarantees though - pension pot values can go down and annuity rates are not generally guaranteed, so it doesn't always pay to delay. Dig out your documents and remind yourself what your agreed retirement date is (you'll find this on your pension statements) and then weigh up your options carefully.

Final salary schemes (defined benefit) differ from other workplace pensions as they aren't investment linked and are less likely to allow you to defer taking your benefits and continue to build up extra entitlement. If you have a defined benefit pension and are thinking of deferring your retirement, you will need to check with your employeer or scheme administrator. 

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