Retirement was once fairly cut and dried. You reached a certain age, finished work, and drew your pension. But in recent times, as life expectancy continues to rise, many people realise their retirements could stretch well beyond their original financial plans and need to rethink when they will retire.

The Office for National Statistics (ONS) found that people aged 65 in the UK in 2023 could expect to live for a further 19.8 years for men and 22.5 years for women, figures that are set to rise by around two years by 2047.

Other factors can come into play, too. Boredom and lack of fulfilment, isolation, and a reduced sense of identity and purpose can lead people to return to work, or “unretire”. Plus, the rising cost of living can also have an effect, making delayed or even reversed retirement a necessity.

Delaying retirement may not seem hugely appealing if you’ve been planning to stop working for a while. But it needn’t be a long wait. PensionsAge magazine cites Aegon research, which found that delaying by just one extra year could boost your retirement income by 16%.

Here, you can explore the potential benefits of delaying your retirement by just a few years, including how it could improve both your financial outlook and your wellbeing.

A phased approach to retirement could boost your pension pot and help you manage your new-found free time

The retirement model of finishing work one day and being retired the next is receding somewhat, in favour of phased retirement. This means reducing your working days incrementally, for example by moving from five days a week to three, then to two, before finishing completely.

This can bring some significant financial benefits. Standard Life revealed that working three days a week from the age of 66 to 70 could boost a pension pot by £27,000. And, even working just one day a week for a few years post-retirement age could add up to £21,000.

These figures include both pension fund growth from delaying using pension savings, as well as the additional contributions made over the extra time.

This type of tapered working also offsets some of the emotional difficulties of retirement. Instead of jumping from being busy with full-time work to having nothing to occupy you, this approach allows you to gradually build new habits into your routine.

You can start to discover the best ways to fill your new-found free time, establishing routines and incorporating recreational time and hobbies into your days at a leisurely pace.

Delaying retirement by just a couple of years can also be beneficial for your retirement income

PensionsAge highlights research from Aegon that calculates the average retirement income to be £4,900 for a 60-year-old with a pension of £200,000. Assuming continued contributions of £200 a month and 4.25% growth (after charges), then:

  • This figure could be boosted to £5,700 annually if retirement is deferred by just one year, thanks to both delayed access to the funds and increased contributions. This equates to a rise of 16%.
  • Delaying retirement by three years could increase income to around £6,900, an increase of 41%.
  • Taking your pension five years beyond your expected retirement age could give you a yearly income of £8,500, boosting your funds by 73%.

Returning to work can support your wellbeing and boost your finances at the same time

“Unretirement” is also an increasingly popular phenomenon, essentially meaning going back to work after having already retired.

Research from Standard Life revealed that more than 10% of retirees over the age of 65 have unretired, with women more likely to do so than men.

For some, it’s a social decision as they’ve found they missed the regular contact and routine associated with work.

There are potentially financial benefits, too. Obviously, a regular income is one, and you may also receive contributions into a workplace pension.

However, to be automatically enrolled, you’ll need to be under the State Pension Age, so this could be at the discretion of your employer. This is currently 66, and will rise to 67 by 2028.

One downside is that you could end up in a higher tax band if you’re also claiming your State Pension or any other retirement income. However, you could choose to defer your State Pension, which can offset this. It can also provide you with a bigger income when you do take it, although over a shorter period of time.

In fact, according to MoneySavingExpert, deferring for nine weeks will net you an extra £2.30 a week, an increase of 1%. Deferring for a year brings an extra £13.35 a week, an increase of 5.8%.

Ultimately, it’s about deciding whether returning to work is the right thing for your wellbeing and your finances, and if deferring your State Pension is a viable option.

Delayed or reversed retirement can help you effectively plan for your leisure time

Beyond the financial considerations, your wellbeing and sense of purpose play a big part in thinking about possibly delaying your retirement. While you may dream of the day you don’t have to work, the reality for many retirees is that they can find the shift in lifestyle challenging.

In fact, Oddfellows has found that 39% of retirees have had to work through negative feelings such as boredom, loneliness, and a loss of identity. And, for those citing boredom as a factor, 66% said it happened within the first year and 34% in three months.

Making financial plans for retirement is important. But, it’s just as key to understand how you’ll spend your time, setting goals and aspirations to keep your emotional wellbeing high and to meet your social needs and expectations.

It could be that saving a little bit more in your retirement fund by waiting a while could go a long way to helping you achieve more of these goals when you do retire.

There are a few points to consider before you delay your retirement

Although it can work well for many people, you need to do your research to see whether delaying your retirement could be right for you.

  • Retiring at a younger age gives you more time to do the things you enjoy while you’re fit and healthy. Speak to your financial planner to work out if it’s likely to be the right decision.
  • Tax is a big consideration, as you may end up paying more if you unretire and are drawing your State Pension. Also, if you draw your pension and continue to work, you may be subject to the Money Purchase Annual Allowance (MPAA), which can reduce the amount you can pay into a pension tax-efficiently.
  • A gradual retirement may be a preferable option, giving you the best of both worlds and allowing you to acclimatise to having the extra free time before fully retiring.

Get in touch

Delaying retirement or returning to work are very personal decisions, and there’s no right or wrong answer.

We can work with you to establish whether it could be a good idea on a financial basis. Taking into account your income and outgoings, lifestyle plans for retirement and your pension investments, together we can devise a bespoke plan that works to achieve your goals.

We’d be happy to talk to you about any aspect of your retirement planning. Email info@perennialwealth.co.uk or call 0117 959 6499.

Risk warnings

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

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.

Workplace pensions are regulated by The Pension Regulator.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

Approved by Best Practice IFA Group 13/05/2025