Guide to money in retirement
Once you're no longer working, you will need to make sure you have enough money to live on, so check on pensions, other incomes and financial matters that may be relevant to you once you've retired.
Benefits and tax allowances in retirement
When you retire, your income usually reduces. To help you manage, you may be able to get certain benefits on top of any State Pension you're entitled to. Some of these benefits are age-related, others depend on your income. Tax allowances are also more generous from age 65 if your income's below a certain level.
Taxpayer or non-taxpayer in retirement
When you reach State Pension age you no longer pay National Insurance contributions, (NICs) but you don't automatically stop paying Income Tax. If your taxable income – including your pension – is more than your tax-free allowances you're still a taxpayer.
How your pension income is taxed
Your State Pension and any workplace or personal pensions you get are taxable. State Pensions are paid without tax deducted. Workplace and personal pensions usually have tax taken off first.
How you pay tax on your pension income depends on which type you get and your overall taxable income. If you're on a low income you may be able to claim tax back.
Claiming back overpaid tax in retirement
Savings interest and retirement annuity income (a regular income payable for life) are normally taxed before you receive them. If you have a low income in retirement, you may be able to get these types of income tax-free. You may also be able to reclaim tax you've overpaid on them in the past.
Age-related tax allowances
As you get older there are certain age-related allowances that can reduce your tax. Some are amounts of income that you don't have to pay tax on - others are amounts that reduce your tax bill.
Working part-time after you retire
Reaching State Pension age doesn't mean you have to give up work, paid or voluntary. You can choose to keep on working while taking your State Pension entitlement, or delay your claim and get paid more later on. The government also offers schemes and incentives to help you find work.
Pensions, benefits and tax when retiring abroad
If you're retiring abroad, or considering doing so, it's important to look into the effect this will have on your finances before you go. This should ensure that you're well prepared.