Almost a third (32%) of adults say pension or tax rules are a barrier to working later in life, according to research from Smart Pension.
The master trust provider said its survey of more than 3,000 adults highlighted the need to reconsider existing pension and tax rules. It argued that these were designed around a traditional retirement model, in which people stopped working and began drawing their pensions at the same time.
Among respondents aged 50 to 65, 44% felt positively about continuing some form of paid work beyond traditional retirement age.
The provider also pointed to government figures suggesting that more than 850,000 people aged 50 to 64 are currently out of work but either actively looking for employment or wanting a job.
Barriers to flexible retirement
One potential obstacle is the money purchase annual allowance, which can be triggered when savers flexibly access taxable pension income. This reduces the amount they can contribute to defined contribution pensions with tax relief from £60,000 to £10,000 a year.
This can complicate retirement planning for people who want to combine pension drawdown with continued employment and pension contributions.
“As ministers consider pension policy, it’s vital that they take a long-term view and think carefully about how their decisions will affect people’s choices in later life.”
Joe Dabrowski, Smart Pension
Those receiving both earnings and pension income may also face higher income tax liabilities as their combined income increases.
Joe Dabrowski, director of policy at Smart Pension, said: “Decisions about pension policy and taxation have consequences that last for decades. They can shape some of the biggest decisions people make about their lives: when to stop working, how much to save and how to balance work and other commitments as they get older.
“As ministers consider pension policy, it’s vital that they take a long-term view and think carefully about how their decisions will affect people’s choices in later life.”
He added: “Helping more people work later in life could mean better retirement incomes, stronger finances for households and a boost to the wider economy.
“Politicians should be looking at how to make working later in life easier for those who want to, including understanding and addressing the barriers that pension and tax rules may create.”
