Consumer Corner: Considering returning to work after retirement? Here’s what you need to know

'Post-covid too the world of work has changed allowing people to work remotely as a consultant for their previous company or take a part-time job working from home.' File picture

Retirement has generally been a joyful thing filled with days playing golf, long walks on the beach, or hanging out with the grandkids. 

However, in recent years the rising cost of living and pension shortfalls have led many people to seek work post-retirement. 

Even if this is not the case many people when they come to retirement don't feel ready to hang up the work boots. 

Post-covid too the world of work has changed allowing people to work remotely as a consultant for their previous company or take a part-time job working from home.

However, the road to work post-retirement can be complex and you need to make sure you have your facts in place before jumping in.

Glenn Gaughran, head of business development at the ITC said that they are hearing of some retirees heading back to work because their pension can’t cover the rising cost of living.

“There may be other financial considerations which prompt you to consider returning to work after retirement. You may not for example have cleared debt accumulated over your working life on time and you might have overestimated the extent to which your pension would cover such repayments. 

"Similarly, you may have taken out a mortgage up until the age of 70 and need more than your pension to cover the repayments.

'The rising cost of living and pension shortfalls have led many people to seek work post-retirement.'

“Many people get a shock when they retire as it is only really then that they truly realise how much money they need to make ends meet in retirement and that their pension falls short in this regard."

Barry Whelan, CEO of Excel Recruitment said when considering work post-retirement firstly try not to make the mistake of thinking that you are too old to return to the workplace. He added that companies will often value the life experience and skills which older people can bring to a job and firm.

“If returning to work as an employee, know that under employment equality legislation, you cannot be discriminated against because of your age, though there are some exceptions. For example, if a job requires a high level of physical fitness, it might be reasonable for an employer to set a maximum age limit for that job.”

Employers can set a compulsory retirement age for employees but only if they can show that they are objectively and legitimately justified in doing so.

“Be sure to understand the requirements of any job you are considering in your retirement and to only consider jobs you are in a position to fulfill. Be open to upskilling if this will improve your chances of returning to the workplace."

Tax is a major element to consider and Marian Ryan, consumer tax manager with Taxback.com said that when you are over 65 and return to work, you are entitled to the same tax credits, rates, and bands as the under 65’s including the employee and personal tax credit at €1,775.

However, once you turn 65, you are also entitled to the age tax credit of €245 for a single person or €490 for a jointly assessed couple. If you are married or in a civil partnership, as soon as you or your spouse turns 65, you as a couple are eligible for the full €490 age credit.

When you become ‘unretired’, your whole income including the income from private pensions, State pensions, and employment income will be subject to tax. 

Employers can set a compulsory retirement age for employees but only if they can show that they are objectively and legitimately justified in doing so.

Pensions are taxable as income under PAYE and USC but not for PRSI. State pensions are included in your Tax Credit Certificate meaning that your tax credits are adjusted to reflect the tax deducted. 

The remaining taxes due will be against your private pension and employment income.

Also, there is an exemption from income tax for people aged 65 or over which allows them to receive or earn income of up to €18,000 a year tax-free if single, or €36,000 if a couple. 

This exemption applies to income from employment as well as from State and private pensions on income tax only.

Mr Whelan said that there are staff shortages across retail, hospitality and healthcare at the moment and many employers in these sectors are offering flexible working conditions in a bid to attract staff.

Also if you’re interested in returning to work on a self-employed basis, but starting your own company feels like too big of a commitment, you could consider offering your expertise in a freelance consulting role, drawing from the skills and expertise that you built up over your career.

“Returning to work after retirement can bring many advantages including extra income to navigate the cost-of-living crisis, social contact, particularly if you’re missing the social aspect of work. There may also be mental health benefits such as improved wellbeing and a better sense of purpose," said Mr Whelan.

Mark Reilly, Pension Proposition Lead at Royal London Ireland said to look at everything if you return to work so that pension funding limits are not exceeded, pension tax-free lump sums remain as ‘tax-free’ and you understand what your ultimate tax position will be.