ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

piggybank icon

Moneyfactscompare -

Sponsored Content
Published: 24/03/2023
couple potting plants together

News contents

Article written by Kellands Hale, our preferred independent advice firm.

This article is not intended to be financial advice to any individual. The views expressed are those of the author and does not endorse the content.

Chancellor Jeremy Hunt is encouraging retirees to return to work. That is one of the key takeaways from the Spring Budget, when he announced the Government will be increasing the Annual Allowance, the Money Purchase Annual Allowance (MPAA) and abolishing the Lifetime Allowance altogether.

“No one should be pushed out of the workforce due to tax reasons,” Hunt said in defence of his Government’s pension reforms. 

Whether this will be successful in encouraging retirees to re-join the workforce is a different debate.

Other economic factors might have forced some to make a retirement U-turn. This includes double digit inflation and market volatility causing some investors to worry about their long-term wealth. 

Whatever your circumstances, there are significant financial and emotional aspects of leaving retirement you should be aware of before you perform a U-turn. Here are three key things to consider:

1. The Money Purchase Annual Allowance

If you have started to access your pension flexibly, you have likely triggered a little-known tax trap called the “Money Purchase Annual Allowance (MPAA)”.

The MPAA reduces your Annual Allowance – the amount you can contribute into your pension tax-efficiently – from £40,000 a year (or your total earnings, whichever is lower) to just £4,000, as of the 2022/23 tax year.

From the 2023/24 tax year both these figures will increase. The annual allowance will become £60,000 a year and the MPAA will rise to £10,000 a year.

Despite this increase, if you’re already withdrawing from your pension and you’re looking to earn an income again there could be better ways to invest your money. 

Discussing your pension contribution and other investment options with your Kellands financial planner could be beneficial at this stage. For example, if you have yet to begin flexibly accessing your pension, it could pay to delay this if you are planning to make pension contributions when you return to work.

2. Moving into a higher tax bracket

If you’re already taking a pension and decide to start earning an income as well, it’s vital to understand how this could affect your tax circumstances.

The way you’re taxed will depend on how you are drawing your pension. Here are three different ways to draw from your pot, and how each might be affected by any additional income you make:


If you’re flexibly accessing your pension, you can design your drawdown method to ensure you pay as little tax as possible on the sums you take.

For instance, taking less than 25% of your pension is usually a tax-free transaction – but above this amount, you will likely be taxed at your marginal rate.

If you subsequently begin earning an income again, your total “earnings” – the amount you take from your pension above the tax-efficient lump sum, combined with your salary – might push you into the next income tax bracket.


Buying an annuity guarantees you a fixed retirement income for life – something that, in these unpredictable times, might bring you some peace of mind.

Annuities are treated like any other earnings meaning, depending on the amount you receive, you could pay income tax on it. Combine this with earnings from employment, and you may find yourself paying a much higher rate of income tax than you thought.

Single lump sum

Generally, taking your pension as a single lump sum is not a tax-efficient way to earn a later-life income. With 75% of your pot usually subject to income tax, you may pay far more tax than necessary using this method.

Additionally, if you take your pension all at once and receive an additional income, your tax liability will likely increase.

Put simply: taking two forms of income at once can mean you pay much higher tax.

If you’re planning a retirement reversal and don’t wish to get caught in this “tax trap”, speak to your Kellands financial planner about your concerns.

3. Keeping up with the rising cost of living

Of course, there are undeniable benefits for some individuals who wish to make a U-turn on their retirement and return to work.

Perhaps you needed a break from full-time employment but have now decided it’s not yet time to lay down your tools for good. Or maybe you wish to help your loved ones thrive and know returning to work can help you achieve those goals.

Whatever your reason, there is no shame in starting again. Whether you go back to your old role, or pursue an entirely new career, if going back to work suits your needs, we can help.

If you are on the fence about this all-important decision, your Kellands financial planner can offer invaluable guidance. Sit down with us, and we can discuss:

  • The tax implications of you returning to work
  • Whether you need to work again, or if you have enough to achieve your goals without it
  • The emotional implications of working after a brief retirement
  • How this move fits in with your long-term plan.

No matter your question or concern, we are here to support your long-term plans, in or out of retirement.

Get in touch

For a discussion about reversing retirement, pensions, or any other financial matter, email us at, call 0161 929 8838, or click here.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.  

© Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No. 193498


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice. will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be ScamSmart. will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be ScamSmart.