Unretired Just Can’t Give Up Working

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Growing numbers of the retired are finding life after work simply isn’t for them and are taking a job again.

Having spent years of dreaming and planning for their retirement, increasing numbers of men are opting to return to work as managers or consultants and clocking up and around 20 hours of paid work a week, equivalent to a part-time job.

This emerging class of retirees going back to work has been coined as the ‘unretired’.

It is estimated that one in 20 retired men aged over 50 is unretired, and they tend to be professionals who have enjoyed above average earnings.

The trend began in America a generation earlier and the figures are four times larger than those found in the UK.

Annuity or drawdown?

However, this trend will have an impact on how someone decides to take their pension income.

A pension saver over the age of 55 can take up to 25% tax free in cash from their pension pot and take the rest as a taxable source of income.

That income can be achieved in two ways: firstly in an annuity which is an annual income figure guaranteed for life or by using income drawdown which is a more flexible but riskier alternative.

Many unretired people may be unaware of the pros and cons associated with each option.

Pension experts are predicting that income drawdown will become more popular with those who are happy with the associated risks of doing so.

Income drawdown will see the remainder of the pension pot, minus the 25% tax free sum, reinvested with any income being drawn directly from the fund, either immediately or at a future date.

Drawdown advantages

One of the more attractive benefits of taking this option is that the unretired person has a flexible opportunity of pausing and then restarting their pension income payments whenever they are needed.

The only drawback is that income drawdown tends to be a complex financial product and is not for all retired people, since the saver controls where their pension is invested and how much money is withdrawn.

Anyone pursuing income drawdown should be aware that their future income will be affected, in that it may leave them short, should they live longer than expected or if their investments perform poorly or even if their withdrawals are too large.

Those opting for an annuity will be guaranteed an income for life though annuities have not been paying well in recent years, making income drawdown a more attractive proposition for some savers.

However, many firms will only allow income drawdown up to the age of 75.

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