Working in retirement

Can I claim my pension and still work?

It's up to you when you retire. It doesn't matter if you're already taking money from your private pension(s) or claiming the state pension - you can continue to work.

In fact, more people are choosing to put off or come out of retirement: the number of people aged 65 and over in employment has reached a record level, according to figures from the Office for National Statistics. 

While there's no longer a default retirement age in the UK, some employers can still impose one if they can give a good reason for it - for example, the role requires certain physical abilities.

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Do I pay National Insurance in retirement?

Once you reach state pension age, you no longer have to pay National Insurance (NI) on your earnings.

In 2025-26, employees pay Class 1 NI contributions of 8% on earnings of between £1,048 and £4,189 a month, and 2% on earnings above £4,189. 

So if your annual salary is £30,000, you'd save nearly £1,400 a year in National Insurance if you continue to work once you've reached state pension age. 

If you are self-employed you can also stop paying National Insurance. You may still have some Class 4 contributions to make in the first year you reach state pension age.

• Find out more: use our National Insurance calculator

What tax will I pay if I'm working and taking a pension?

While you won't have to pay National Insurance after you reach state pension age, if you carry on working while taking either a private pension or the state pension, bear in mind that the extra income this generates might push you into a higher tax band. 

Income from pensions is taxed in the same way as your earnings and any other sources of income you receive, such as savings interest.

Everyone can receive income of up to £12,570 tax free in 2025-26. Income tax will then be charged at 20% on the next £37,700. If your total income exceeds £50,700, your earnings above that level will incur a tax rate of 40%. 

Income tax bands and rates differ in Scotland.

You have the option to delay taking your state pension. Doing so may help you to reduce your tax bill if you're still working when you reach state pension age - it also means you'll get a higher state pension when you eventually claim it.

However,  it will take years for you to be better off overall than if you had started receiving your state pension straight away. 

Can I still pay into a pension if I'm already drawing from it?

The earliest age you can access money in a private pension is 55 (rising to 57 from 2028).

If you're under 75, you can continue to save into a pension and get tax relief, even if you've already started taking money from your retirement savings. 

There is a cap on the amount you can save into a pension each year while still benefitting from tax relief, known as the annual allowance. This is set at £60,000, or 100% of your income if you earn less than £60,000.

However, this limit falls to £10,000 a year when you access your pension flexibly - which includes taking a taxable lump sum or taking an income from your pot using pension drawdown.

The lower limit won't be triggered if you've only taken your 25% tax-free lump sum or used money in your pension to buy an annuity. 

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Starting your own business when you retire

If you’re thinking about starting your own business, or becoming a consultant to make the most of your professional expertise, you can either set up as a sole trader or a private limited company. 

Setting up as a sole trader can be a simpler process, but you’re personally responsible for any losses your business makes. A limited company restricts your financial liability so your personal assets are protected, but you have to register for corporation tax.

You’ll need to file a self-assessment tax return if your income from self-employment is more than £1,000, so it’s important to keep records of your takings and expenses, including bank statements and receipts. 

Some of the expenses you incur are tax-deductible, and any losses you make can be set against future years.