Could a “flexi-retirement” be right for you?


Middle-aged man and woman riding horsesFlexi-retirement – sometimes called “phased retirement” – is becoming a popular choice for many people of, or approaching, retirement age. According to Professional Adviser, two-thirds of workers reaching State Pension Age in 2022 plan to continue working in some capacity.

The study revealed that 24% intend to work part-time hours either in their existing job or a different one, 15% plan to continue working for their own firm, and 12% have plans to set up their own businesses or begin a new career in entrepreneurship.

This approach can allow you to remain working in some capacity while also enjoying some of your hard-earned retirement benefits.

Read on to learn more about what “flexi-retirement” is, and whether it could be right for you.

The benefits of flexi-retirement

There are many benefits of a flexible retirement. Maintaining the routine of working while also making more time for hobbies and other activities is perhaps the main reason many people opt for flexi-retirement. Read our top three reasons below.

1. More time for other areas of life

Perhaps the main reason people retire at all is so they can spend more – or all – of their time on other areas of their lives.

Flexi-retirement could allow you to spend more time with family or friends, dive more deeply into a hobby, or take up a brand new one. Some people choose to make the most of their flexi-retirement to do more travelling.

2. Maintain a structure and working relationships

For many people, a key worry about retirement is losing the routines and social interactions that are provided by being in the workplace.

Over time, people build up strong professional and personal relationships with their colleagues, and many are reluctant to give these up. Flexible retirement allows you to maintain these social interactions, and many of the routines of work, while reducing your hours and enjoying a more balanced lifestyle.

3. Maintain your income and lifestyle

Flexi-retirement means that you don’t have to compromise your income. You can continue to earn a salary from your reduced-hours employment, while topping up your previous income by accessing one or more of your pensions.

You will still be able to afford to spend your usual amount of money on holidays, hobbies, and so on while having more time in which to enjoy them.

Important considerations of flexible retirement

As your pension savings account is your key to financial freedom in your later years, any decisions regarding drawing it down must be made carefully. There are several potential disadvantages to flexi-retirement.

Beware of the “pension dipper” tax trap

If you begin to draw down funds from your defined contribution pension account, the sum that you can contribute while protecting yourself from tax may be reduced.

This is what’s referred to as the Money Purchase Annual Allowance (MPAA). Usually, you can pay in up to £40,000 a year (or your annual earnings, if lower) into your pension tax-efficiently.

However, if you begin to draw money flexibly from your pension and so trigger the MPAA, this allowance reduces to just £4,000 a year. This means you may be able to save less into your pension while still working.

Check there is enough in your pension savings

Drawing on even part of your pension ahead of your full retirement, and reducing your working hours, will dent your fund.

So, careful planning is required to ensure you have enough to reach your financial goals without compromising your lifestyle in the long run.

Get in touch

There are many benefits to flexi-retirement, but also a few important considerations to take into account. When making any decisions about your pension, professional advice is crucial so you can make the most of your retirement.

If you’d like to discuss your retirement options, please email or call 0115 933 8433.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.