From education to employment

Four things over 50s should know about the Government’s ‘Returnership’ scheme

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With up to 76,000 people returning to work due to rising essential bills and food, pensions expert and chartered financial advisor, Ray Black from Money Minder, has shared his top tips for what pensioners should consider if they’re thinking about going back into the workforce.

Chancellor Jeremy Hunt shared in his spring budget his plans for ‘returnerships’, a UK government initiative designed specifically for older workers to provide the opportunity to go back to work. 

The scheme will encourage those over 50s who took early retirement during the pandemic but are still able to work, to get back into employment with the added benefit of boosting the UK workforce and skills. 

1 – It can be an opportunity to learn new skills

Many employers overlook the opportunity that lies in the training of older workers. With the new ‘returnerships’ programme, over 50s will have access to a host of courses to learn new skills.

Apprenticeships, skills bootcamps and sector-based work academy programmes are all on offer which can help people to gain skills rising in demand that look desirable to employers, such as digital or data knowledge. 

Those looking to return to work can also join skills-based boot camps to get up to speed and enhance their existing skills. 

2 – It can help you to achieve your desired retirement 

According to Age UK, two million older households won’t have enough money coming in to cover their essential spending this year, which may yet increase further if the cost of those essential bills keeps on rising. 

Returning to work can not only help increase disposable income, it can also have hugely positive effects on their well-being as money worries ease. 

For those people with very large pension savings in place that may have been worried about a potential lifetime allowance tax charge being levied at some point in the future, the recent changes to the lifetime allowance (LTA) will be very welcome. The change has enabled them to potentially continue working for longer or deciding against an early retirement that they may have otherwise pursued now that they don’t need to worry about a large LTA tax charge being applied, however, it’s also important to remember that the LTA tax charge (or something similar) could be brought back in at a later date,  

3 – Have you already withdrawn money from your pension? 

When considering going back into employment, it’s worth calculating the amount of money, if any, already taken out of your pension pot and your tax that has already been paid. The sum of this could affect whether it is financially a good decision for you to return to work or not in the current tax year.

If you have already withdrawn the 25% tax-free cash entitlement, any further income you withdraw is classed as taxable income which could affect your wages drastically as you might face a higher tax burden than you expect when you get your paycheck each month. However, if you are withdrawing income under a ‘flexible access drawdown’ arrangement, it’s possible for you to reduce, postpone or stop your pension income coming in. This will enable you to enjoy your wages as tax efficiently as possible, without your pension income having a negative impact on your wages by increasing your annual income tax liability. 

4 – Use a calculator to establish your final costs 

Deciding whether to return to work can be a big decision and it’s important to get a plan arranged for your pension contributions. 

Getting expert advice and / or using a pension drawdown calculator will help you to determine the amount of income you may be able to withdraw from your pension pot each year without having to worry about running down the value of the fund over the short, medium and long term. It will also help you to weigh up the pros and cons of keeping your pension plan invested or using the fund to purchase a guaranteed income for life in order to provide some certainty in your retirement years.

Ray Black added: The upcoming changes for pensioners are exciting, and there is a big opportunity for those who are keen to get back into work to learn some new skills and build a healthy pension fund. 

“Returning to work can be an appealing option if you’re feeling dissatisfied with retirement as working can offer a sense of purpose and routine. However, going back to employment once you have got used to retirement and a certain lifestyle is a big step and not as simple as you might think.”

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