Whether you’re planning an around-the-world trip or simply want to spend more time with your loved ones, retirement is the ideal time to prioritise the things you put on hold during your working life. 

The retirement landscape, though, has shifted significantly in recent years, with rising living costs placing considerable strain on many UK households. As a result, some work leavers have decided to “unretire” and return to the workplace. 

Data from the Labour Force Survey, published by the Institute for Fiscal Studies (IFS), reports that from October to December 2022, “there was a sharp and statistically significant uptick in 50- to 64-year-olds moving out of inactivity and back into the workforce”.

Even though financial strain may have previously forced some retirees back to work, there are some considerable benefits to doing so by choice. It could even improve your mental health. 

Continue reading to discover more about “unretirement”, and some important factors to consider before deciding if it could be right for you. 

Unretirement has been on the rise recently, partly due to high living costs

Unretirement is simply the process of returning to the workplace, either in the same role or a new capacity, after previously stopping working. 

There’s a chance that you’ve seen your monthly expenditure rise significantly in the last few years. Even though inflation has dropped from its post-Covid peak of 11.1% in October 2022, the Consumer Prices Index (CPI) remains relatively high at 6.7% for the year to August 2023.

As a result, recent retirees might feel the need to supplement their income to manage these rising costs. In fact, a study published by MoneyAge revealed that 42% of over-55s felt worse off in 2022 compared to the previous year.

The report goes on to state that 4% of retirees had already started working again in some form, while a further 5% were considering doing so. 

While rising living costs have forced some back to work, it seems that this trend isn’t new. Indeed, a 2017 study from the University of Manchester suggested that around 1 in 4 retirees in the UK return to work, often within five years of retiring. 

Returning to the workplace could give your income – and even your pension – a considerable boost

Perhaps the main benefit of unretirement is the additional income, which could be useful in a time of high living costs. 

Whether you work part-time, in a consulting capacity, or even start your own business, the supplementary income you earn could help alleviate any financial strain. 

Aside from helping you deal with rising costs, unretirement might mitigate the need to draw from your pension. This could see your fund last longer.

As well as reducing the need to draw from your pension, you’ll also have the option to continue making pension contributions. While this could boost your pot’s value, it’s important to remember that you may face restrictions on tax-efficient contributions if you’ve already started drawing from your pension flexibly.

Once triggered, the Money Purchase Annual Allowance (MPAA) restricts the value of the tax-efficient contributions you can make to £10,000 in the 2023/24 tax year.

Unretirement can be a choice rather than a necessity, and it can benefit your mental health

In addition to the financial benefits, unretiring could also be beneficial for your mental health. You might find that the lack of structure to life after work leaves you bored. A lack of human contact, too, can be difficult after the hustle and bustle of a workplace.

If your work and identity were previously inextricably linked, unretirement could give you a new purpose and offer invaluable opportunities for social interaction, boosting your mental wellbeing.

Additionally, if you’ve ever dreamed of starting your own business, retirement could be the ideal time to take the plunge. 

It’s important to remember that you likely had a good reason to retire in the first place, aligned with your personal goals. Heading back to the workplace could affect your work-life balance and derail your progress towards these goals, so it’s essential to strike a balance between your objectives and your work.

Get in touch

If you’re concerned about rising costs during retirement, or simply wish to continue working during the next phase of life, we can help you decide whether unretirement is right for you. 

Please get in touch and speak to our Chartered Financial Advisers today.

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.