Increasing your income when you get to pension age
Once you reach State Pension age you still have options for increasing your retirement income. You may be able to take home more money from doing the same hours of work. You can put off claiming your State Pension to get a one-off cash payment or a higher pension and there can be advantages to putting off taking a personal or company pension.
Increasing your income: your options
There are a number of ways which may increase your income after you reach State Pension age. Here are some options you may want to consider.
Earn more doing the same hours of work
After State Pension age you don't pay National Insurance - and after 65 you get a more generous tax allowance. So you take home more of your pay packet. Or you may be able to cut your hours a bit and still get a similar amount.
Put off claiming your pension to get more for the rest of your life
If you carry on working, or have other sources of income, it may be worth delaying claiming your State Pension. This means you could get more when you do start claiming a pension. The same might apply to any company or personal pension. However, you should take advice before delaying claiming your company or personal pension, because you could get less by delaying.
Putting off claiming your State Pension is called deferring. The longer you put it off, the more your State Pension grows - as long as you defer for at least five weeks. You don't have to say in advance how long you'll defer for and you can start claiming it at any point.
Get a one-off payment
If you put off claiming your State Pension for a year or more, you may be able to get a lump sum when you come to claim it, instead of taking a higher pension.
Combining the options
You can also choose to combine these options. You might choose to continue working, but also claim your pension. Or you might choose to work part-time.
- Working part-time after you retire
- State Pension deferral - taking up your State Pension later
- Tax on your State Pension (HMRC website)
If you have a company pension, your employer may allow you to put off claiming it until after your company's normal retirement age. It depends on the scheme. You can check with your employer or the scheme to find out.
You can start taking an income from a personal pension at any age between 55 and 75.
Here is an example of how these choices can affect someone's income after State Pension age. Maureen is coming up to State Pension age, which for her is 61.
"Right now I earn £332 a week working full time. I found out that if I start claiming my State Pension straight away when I am 61 I can expect to get £138 a week. I've got a small bit of savings for emergencies but I don't have any personal pensions. I'm not sure that'll be enough when I stop work - I'd have to make some sacrifices to drop £194 in income a week. I'm really worried - is there anything I can do?"
Maureen can make a real difference to her retirement income by working for a bit longer. Here's how the three options look for her:
- she could carry on working the same hours and take home £366 because she stops paying National Insurance
- she could put off claiming her State Pension for a year which could give her a permanent increase of £14 a week - this would mean her State Pension was £152 a week
- or she could put off her claim for a year and get a one-off payment of around £7,265 and the same State Pension of £138 a week
Maureen's circumstances are based on real-life situations.