State pension age, currently set by the government at 66, is the earliest that a person can access their state pension funds. The DWP has issued new guidance highlighting that certain people aren’t forced to give up their career once they hit this milestone.
While they can continue work, there are some extra things they’ll need to take into account. This includes losing National Insurance liability, potential income tax increases and deciding whether to defer their state pension.
In 2011, a successful campaign by Age UK saw the Default Retirement Age being abolished. This former law allowed employers to force their employees to retire at 65, however, some employers and workplaces are still allowed to force their employees into retirement.
DWP guidance highlights: “In some cases an employer can force you to retire at a certain age – known as ‘compulsory retirement age’. If they do this they must give a good reason why.”
Good reasons according to the department include working a job that has certain physical abilities, such as construction. Or there are additional laws that have set an age limit on working in your specific industry, for example in the fire service.
If you believe you’ve been treated unlawfully in terms of retirement or finding work after state pension age, the DWP highlighted the expanse of rights employees have over the age of 66 on the grounds of age discrimination. You could make a claim to the employment tribunal and do not have to give your date of birth when applying for a new job.
If you decide not to retire at the state pension age, you can request more flexible or part-time work but the DWP warns your employer has “the right to reject your request”. You can also still receive your state pension while working but this could hold some major tax liabilities.
Once you hit state pension age, you no longer have to pay National Insurance which could up your earnings from work. Adding state pension payments to this higher income could easily place you in a higher income tax band, leaving you with a higher tax bill.
Currently, you can earn up to £12,570 a year without paying any income tax. At the basic rate you’ll be taxed at 20% on everything you bring in over this amount until £50,270 when the higher rate of 40% kicks in. Once your earnings reach £125,140 per year you’ll be taxed at an additional rate of 45% on every pound after this threshold. State pension, private pensions, employment earnings and even interest on savings over certain amounts are added together for income tax.
In order to stop your National Insurance payments you may need to show your employer proof of age, such as a birth certificate or passport. If you don’t want to show your employer these documents you can request a letter from HMRC to show your employer instead.
This letter will confirm you’ve reached state pension age and no longer need to pay National Insurance. To get this letter, you’ll need to write to HMRC explaining why you don’t want your employer to see your birth certificate or passport.
You can also choose to defer your state pension payments until you actually retire, which will see you getting a bigger payment when you eventually do claim it but this could also be subject to tax depending on your income. Usually just before you hit state pension age you receive a DWP letter explaining how to claim it, but if you want to defer your payments you don’t need to do anything as it will be automatically deferred until you make this claim.