Jim Carrey has had an impressive career. Throughout more than 40 years, the actor has amassed more than 70 acting credits on IMDb, and is one of the highest-grossing actors of all time at the North American box office.
So, fans around the world were understandably disappointed when the legendary actor announced his retirement in 2022 following the release of Sonic the Hedgehog 2.
But, the recent trailer for the third instalment of the Sonic franchise showed that Carrey is set to reprise his role. Perhaps retirement isn’t as final as it seems.
While the idea of returning to work after you’ve retired might seem relatively unusual, it is actually becoming increasingly common in the UK.
In fact, research from Legal & General found that 2.8 million people over 50 have returned to work after previously being retired, with 37% of those doing so to meet rising living costs.
Whether you’re driven by a desire to bolster your income, stay active, or remain in touch with coworkers, more and more people in the UK are “unretiring” and returning to the workplace.
That said, it isn’t the right choice for everyone, and there are some benefits and downsides to consider before you make a decision. Continue reading to discover some of these.
Returning to the workplace after a period of being retired
“Unretirement” simply refers to the process of returning to work after you’ve retired. That might be in the same role, a new position, or a different capacity altogether, such as part-time, as a consultant, or even starting your own business.
As mentioned, this trend is becoming much more common, and it could be due to the fact that many retirees are searching for ways to supplement their income in the next phase of their lives due to economic pressures.
Indeed, the Legal & General study above states that 37% of those who returned to work did so to manage a rising cost of living. This is somewhat understandable considering the fact that inflation peaked at 11.1% in October 2022, the Office for National Statistics reports.
There’s a chance that some retirees may have underestimated just how much the cost of living might affect their income overall, too.
According to Standard Life, while retirees aimed to accumulate a pension pot of £250,000 on average, the reality often fell short, with the average fund sitting at around £131,000.
This could result in financial strain, prompting many to seek additional sources of income, which is where unretiring comes in.
Unretiring could offer you some extra income, as well as benefit your mental wellbeing
Perhaps the main benefit of unretiring is that it provides you with an opportunity to earn an additional income, which can be incredibly valuable during periods of high living costs.
Whether you decide to work part-time, take on a consultancy role, or even start a new business, the supplementary income can help alleviate any financial strain you may experience during the next phase of your life.
Moreover, returning to work could reduce the need to draw from your pension, allowing your fund to last longer and potentially even continue to grow.
Better yet, continuing to work also allows you to make additional contributions to your pot, which can significantly boost its overall value.
This is particularly important considering life expectancies are rising. According to FTAdviser, the number of centenarians in the UK has more than doubled since 1991 and is projected to increase from 16,000 to 29,000 by 2041.
Due to this, your pension may need to support you through a 20-, 30-, or even 40-year retirement, during which your financial needs may fluctuate as you are required to pay for later-life care. So, unretiring could be a practical way to ensure that your pot lasts throughout your entire lifetime.
Unretiring also offers benefits beyond the financial. Indeed, you may find that the lack of structure after leaving work can lead to boredom and a sense of isolation as the regular social interactions of the workplace disappear.
Returning to work could restore your sense of purpose and provide opportunities for social engagement, which is important for maintaining your mental health and overall wellbeing.
Your tax-efficient contributions may be limited if you’ve already accessed your pension
While unretiring can provide financial and personal benefits, it’s still essential to be mindful of the potential downsides.
For instance, even though continuing to work does allow you to contribute more to your pension, it’s vital to be aware of the tax implications, especially if you’ve already started drawing an income from your fund.
Normally, in 2024/25, the Annual Allowance allows you to benefit from tax relief on pension contributions up to £60,000 or 100% of your earnings, whichever is lower.
This means that the government essentially tops up your pension when you contribute, so £100 would only “cost” you:
- £80 for basic-rate taxpayers
- £60 for higher-rate taxpayers
- £55 for additional-rate taxpayers.
However, if you’ve already started drawing from your pension, you may have triggered the Money Purchase Annual Allowance (MPAA). This restricts the value of the tax-efficient contributions you can make to your pension to £10,000 in the 2024/25 tax year.
This significantly limits the amount you can save tax-efficiently, reducing the overall benefit of continuing to contribute to your pension while you’re working.
Understanding these rules and consulting a financial planner could help you navigate any complexities and make the most of your contributions.
You could affect your work-life balance by returning to the workforce
It’s vital to remember why you retired in the first place, whether it was to spend more time with loved ones, travel, or pursue hobbies.
Returning to work could disrupt your work-life balance and divert you from your personal goals and aspirations.
The demands of returning to the workforce might even affect your mental wellbeing at a time when you should be enjoying the fruits of a lifetime of hard work.
As such, if you are considering unretiring, it’s essential to strike a balance between your life objectives and the demands of work.
Speak to a financial planner
If you’re thinking of returning to work for purely financial reasons, it might be wise to speak to a financial planner first.
We could take a close look at your financial situation and help you figure out whether you have more money than you think. For instance, we could help track down any lost pension pots you have from previous jobs.
If you’re still considering unretiring but aren’t sure whether it’s the right choice for you, we could take a close look at your financial situation and help you make an informed decision.
To find out more, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
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 performance.
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.
