The number of state pensioners still working has passed 1.5 million, with around 1.56 million over-65s on employers’ payrolls — a 12% increase since 2020-21, according to HMRC estimates. For a 66-year-old relying solely on the new State Pension of £11,973 a year, that income lands thousands below what the Pensions and Lifetime Savings Association says a moderate retirement costs. More than one in five pensioner couples now have earnings income, and the proportion keeps climbing.
Disclosure: Some links on this page are affiliate links. If you make a purchase through them, Britwealth may earn a commission at no extra cost to you. We only include products and services that are relevant to the topic.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The employment rate for over-65s now sits at 11%, up from 8.7% in 2020. A separate survey by Standard Life found that one in six retirees has already returned to work or is considering doing so because of cost-of-living pressures. Nearly 1.9 million pensioners are living in poverty according to government figures. This isn’t a niche trend — it’s a structural shift in what retirement looks like for millions of people. Here’s what you actually need to know.
The central concept here is phased retirement — the idea that retirement is no longer a single moment where work stops. More people are stepping down gradually, mixing part-time work with pension income. Some choose this for the social and mental benefits. Many don’t. The difference matters because the financial mechanics — how much you earn, what tax you pay, how your pension is affected — change depending on which camp you’re in.
What I tend to notice is that people assume working past State Pension age is a lifestyle choice. For a growing number, it’s a financial necessity that could have been avoided with earlier planning.
The Gap Between State Pension and What Retirement Actually Costs
The full new State Pension of £11,973 per year is the foundation most people build on. But the Pensions and Lifetime Savings Association estimates that a single person needs over £14,000 a year for a minimum retirement lifestyle, and a couple needs around £43,900 for a moderate one. That’s a gap of nearly £32,000 for a couple relying solely on two full State Pensions.
→ Scroll right to see all columns
| Retirement lifestyle | Single person (annual) | Couple (annual) |
|---|---|---|
| Minimum | £14,400 | £22,400 |
| Moderate | £31,300 | £43,900 |
| Comfortable | £43,100 | £60,600 |
| Full new State Pension (2025-26) | £11,973 | £23,946 (two pensions) |
Even two full State Pensions combined (£23,946) barely clear the minimum threshold for a couple and fall well short of a moderate lifestyle. That moderate budget allows £103 a week for groceries, £63 for eating out, a two-week European holiday and a UK weekend break each year. It’s not extravagant. Yet 15 million people in the UK are currently under-saving for retirement, according to government analysis.
The consequence is straightforward: if you’re relying on the State Pension alone, you’re likely to face a retirement income gap that forces you to keep working, draw down savings faster than planned, or accept a lower standard of living. Aegon’s research found the top reasons people aged 60-plus continue working include keeping an active brain and enjoying work — but for 22% of pensioners, the reason is simply that their income isn’t enough.
Deferring your State Pension is one option that can help. You gain 1% for every nine weeks you delay claiming, which works out to roughly 5.8% extra per year. But that only helps if you have other income to bridge the gap in the meantime. For many, that’s the problem.
Common Pension Gaps That Force People Back to Work
Missing National Insurance qualifying years
Your State Pension amount depends on your NI record. You need roughly 35 qualifying years to get the full amount. A single missing year can reduce your annual State Pension by around £300 — and that shortfall compounds across 20-plus years of retirement, turning into over £6,000 in lost income. Checking your NI record through the government’s online service takes about 10 minutes. If you have gaps, you can usually top up voluntary contributions for the past six tax years. The deadline for filling gaps from 2019-20 is April 5, 2025 — that window is closing fast.
Opting out of workplace pension schemes
Auto-enrolment has brought millions into workplace pensions, but around one in eight eligible workers have opted out. For someone in their thirties, opting out for just five years could reduce their pension pot at retirement by tens of thousands of pounds, depending on employer contributions and investment growth. The 45% of over-40s who say they want increased employer contributions, from a survey of 2,000 UK adults, suggests many recognise the value only after it’s too late to recover the lost years.
Not claiming benefits you’re entitled to
Pension Credit is a means-tested benefit that tops up your income if you’re over State Pension age and on a low income. Yet hundreds of thousands of eligible pensioners don’t claim it. For a single person, Pension Credit can boost income to over £200 a week. It also acts as a gateway to other support — help with housing costs, council tax reduction, and the warm home discount. If you’re working past State Pension age because your income is tight, checking eligibility for Pension Credit should be the first thing you do, not the last.
Underestimating how much housing costs matter in retirement
Research from The Conversation found that retirement-age workers with a mortgage or renting are 117% more likely to be forced to work compared to homeowners who own outright. That’s more than double the likelihood. If you’re approaching retirement with outstanding housing costs, the pressure to keep working is significantly higher. Paying down mortgage debt before retirement, or planning for how rent will be covered, is one of the most impactful moves you can make.
What I tend to notice is that the people most likely to be forced back to work — women, ethnic minorities, renters, and those in routine manual jobs — are also the least likely to have had access to good financial guidance earlier in their careers. That pattern shows up clearly in the data.
How to Navigate Working Past State Pension Age
Understand the tax rules when you earn and draw a pension at the same time
Once you reach State Pension age, you can earn as much as you like without affecting your State Pension payments. There’s no earnings limit. But your total income — State Pension plus earnings plus any private pension withdrawals — is subject to income tax. The personal allowance for 2025-26 is £12,570. If your total income exceeds that, you’ll pay tax on the excess. If you’re still contributing to a workplace pension while drawing from another pension pot, the Money Purchase Annual Allowance (MPAA) may limit how much you can contribute tax-efficiently once you’ve flexibly accessed a defined contribution pension. That limit is currently £10,000 per year.
Decide whether to defer your State Pension
Deferring adds 1% for every nine weeks you delay. If you defer for a full year, you get roughly 5.8% more State Pension for life. For someone entitled to the full £11,973, deferring one year would add about £694 per year. But you need to live long enough to recoup the income you gave up during the deferral period. The breakeven point is typically around 17 years. If you’re in poor health, deferring may not make sense. If you expect to live well into your eighties, it can be a worthwhile trade.
Consider phased retirement options with your employer
Some employers offer flexible retirement options — reduced hours, job sharing, or moving to a less demanding role while keeping some income. A survey found that 36% of over-40s favour phased retirement as a beneficial employer policy. If your employer doesn’t offer it formally, it’s worth asking. The abolition of the default retirement age in 2011 means employers can no longer force you to retire at 65. You have more negotiating room than you might think.
Plan for the State Pension age rising again
The State Pension age will reach 67 in 2026-27 and is scheduled to hit 68 between 2044 and 2046. If you’re in your forties or younger, your State Pension age is almost certainly higher than 66. That means more years of relying on private pension savings or earnings before any State Pension kicks in. The longevity paradox — living longer but needing more savings to do it — is the central retirement challenge for this generation.
If you’re unsure how your pension options interact with your earnings, getting a clear picture of your numbers matters more than any single product choice. A financial advisor can help you model different scenarios, but even running your own figures through the government’s pension calculator gives you a starting point.
Frequently Asked Questions About Working in Retirement
Can I work and claim State Pension at the same time? ▾
Does working past State Pension age affect my other benefits? ▾
Do I still pay National Insurance after State Pension age? ▾
What happens to my workplace pension if I keep working? ▾
Is it worth deferring my State Pension if I’m still working? ▾
What if my employer wants me to retire at 65? ▾
Why This Trend Will Keep Growing
The proportion of pensioners with earnings income rose from 6% to 7% between 2022-23 and 2023-24, and over one in five pensioner couples now have earnings. With the State Pension age rising to 67 in 2026-27 and the full pension falling thousands short of a moderate retirement, more people will need to work longer — whether they want to or not. The 35% of over-40s who expect to work past 70 are likely being realistic, not pessimistic.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Retirement Regrets: The Mistakes UK Retirees Wish They’d Avoided.
Sources and Further Reading
From Workaholic to Wellness Warrior: Prioritising Health in Retirement — How to shift focus from earning to wellbeing once you do stop working.
Retire Early in the UK: Dream or Realistic Goal? — What early retirement actually requires in savings and planning.
The Telegraph (2026). Number of state pensioners in work rises. 🔗
The Telegraph (2025). Why retirees are forced to go back to work. 🔗
The Conversation (2024). Who chooses to work, and who is forced to, after retirement? 🔗
The Independent (2025). Pensions: 35% of over-40s expect to work past age 70. 🔗
Pensions and Lifetime Savings Association. Retirement Living Standards. 🔗
