There are plenty of reasons why you might think about going back to work after retirement but there’s also a lot to consider. To help you understand the impact it may have on your pension, we’ve put together some useful information below.
Eligibility
The first thing to check is whether you’re eligible to return to work and whether your employer agrees. There may be specific rules around age and the number of hours you can work or criteria on the type of work you can carry out.
To find out if you are eligible for re-employment, it’s best to speak with your former employer.
Your pension benefits
Depending on your scheme, if you return to work after retirement, your pension payments may be stopped or reduced. This is known as abatement, which means that as you are earning a salary, you are no longer considered to be retired.
The amount of reduction will depend on your income from your new job and your individual circumstances. But the general rule is that if your new salary and pension do not exceed your former salary, your pension would not be affected.
For LGPS members, your pension fund (the administering authority) has specific rules and policies on returning to work. Your fund has the power to decide whether your pension benefits will be reduced or not.
To find out more about the impact on your pension benefits, please speak with your fund or employer. Fire members can find more information here.
Please note
Abatement only applies if you are re-employed in a public service role (fire and rescue for Firefighters’ scheme, police service for Police scheme, local government for LGPS).
If you return to work in a different role, which gives you access to a different pension scheme, your pension will not be affected.
Plus, abatement does not apply if you are a member of a 2014 Local Government Pension Scheme or a 2015 Police or Firefighters’ scheme.
Protected Pension Age (PPA)
For Fire and Police schemes only:
On 6 April 2010, the minimum age at which a pension can be taken increased from 50 to 55. However, if you have a Firefighters’ or Police pension, your right to take out your pension before age 55 is protected.
Depending on your scheme’s rules, you may lose your protected pension age if you return to work after retirement. And if it is lost, a tax charge may be placed on any past benefits paid to you before age 55.
Tax implications
Returning to work may have tax implications like changes to your tax bracket or your ability to claim certain tax credits. If you lose your protected pension age, you may have to pay a tax charge on any past benefits paid to you before age 55 (see previous section for more).
Remember, it’s wise to get independent financial advice to fully understand how re-employment may affect you financially.
Re-joining the scheme
If you have a firefighters’ or police pension and return to work, you will be enrolled onto the scheme and pay pension contributions again (unless you opt out).
For LGPS members returning to work, if you earn over a certain threshold, you will be enrolled onto the scheme and pay pension contributions again (unless you opt out).
Notifying us
If you plan on returning to work in a public service role (fire and rescue for Firefighters’ scheme, police service for Police scheme, local government for LGPS), you may need to notify us (as your pension administrator) and your employer.
Important
The rules for returning to work after retirement can be complex and vary depending on your individual circumstances. Before making a decision, it’s wise to seek professional advice or speak with your employer.
