Late Retirement and the Non-State Pension

There is no state pension age (see State Pension Age) for non-state pensions (see Non-State Pensions), that is, no set age at which you are automatically asked whether you would like to begin drawing your pension. Different pension schemes will have different general rules for their members, but legally you are currently allowed to begin drawing your non-state pension at age fifty and you must begin drawing a pension by age seventy-five. There is no need to retire when you wish to begin drawing your pension; you are allowed to work and draw a retirement income if you wish. If you wish to defer taking your pension, you can do so up to age seventy-five. You may be entitled to extra benefits if you choose to delay taking your pension, for example, your defined contribution scheme may offer you lower management charges, or your defined benefit scheme may offer you extra years of scheme membership for the time your pension is deferred. You can also choose to defer drawing your state pension if you wish: see Late Retirement and the State Pension for more information.

Since October 2006, new age discrimination laws protect your right to work until you are at least sixty-five years of age. If you wish to work longer you will have to reach an agreement with your employer. Once you are of State Pension Age you no longer have to pay National Insurance Contributions on your earnings.  If you choose to work longer and defer drawing your non-state pension, you may be able to ensure greater financial security for your retirement. Retiring later gives you the chance to earn longer and save more, as well as invest your pension fund for an extended period or remain a scheme member for more years, building up entitlement to a larger annual pension on retirement.

However, many pension schemes have set rules about when their members should begin drawing their pensions, for example, at age sixty. If your pension scheme has a recommended retirement age you should ensure that you will not be penalised if you choose to leave your pension invested for a longer period. Not every pension scheme will offer deferral benefits; some schemes may actively discourage your remaining a scheme member and charge you for continuing to invest your savings. It is also important to remember that leaving your savings in a defined contribution or money purchase scheme continues to present a risk; if investment returns fall, the value of your pension fund could decrease.

It is important to consult your pension scheme advisor if you are considering deferring your non-state pension. Your scheme may make you a good offer, perhaps extra years of membership or extra contributions, and encourage you to delay drawing your pension a few more years. On the other hand, you may be informed that choosing to defer your pension will incur extra charges or penalties and could present a risk to the potential value of your retirement income. Each pension scheme will have individual rules and regulations, and your personal options may depend on factors such as how long you have been a scheme member, the size of your pension fund and / or your age. If you are uncertain about the exact benefits and disadvantages of deferring your pension considering your individual circumstances, consult an independent financial advisor for advice and assistance.