Phased Retirement Income Planner
Phased retirement lets you draw part of your pension while still working reduced hours. This calculator models a defined contribution pension with partial drawdown alongside a part-time salary.
Frequently Asked Questions
What is phased retirement?
Phased retirement is a strategy where you gradually reduce working hours and draw part of your pension to supplement your reduced income, instead of retiring all at once. It allows a smoother transition to full retirement.
At what age can you start phased retirement in the UK?
You can access pension benefits from age 57 (from 2028, rising from 55). The minimum pension access age aligns with phased retirement planning. State pension starts at 66 (rising to 67 by 2028).
Does taking pension drawdown trigger the MPAA?
Yes. Taking income from a defined contribution pension in flexible drawdown triggers the Money Purchase Annual Allowance (MPAA) of £10,000, limiting future pension contributions. However, taking only tax-free cash (Pension Commencement Lump Sum) without drawdown income does NOT trigger the MPAA.
What is an Uncrystallised Fund Pension Lump Sum (UFPLS)?
UFPLS is taking lump sums directly from your uncrystallised pension — 25% of each lump sum is tax-free, 75% is taxable. This is an alternative to designating funds into drawdown. UFPLS does trigger the MPAA.
Can I do phased retirement from a defined benefit pension?
Some defined benefit (DB) schemes offer phased retirement — drawing a reduced pension while still working for the same employer. The rules vary by scheme. Most DB schemes require you to take the full pension at the defined retirement age.
How does phased retirement affect National Insurance?
If you continue working part-time, you continue paying NIC if earnings exceed the Primary Threshold (£12,570/year). Above State Pension age, NIC stops on employment income — an advantage of working past 66.
What is flexible retirement in public sector pensions?
Public sector DB schemes (NHS, Teachers, Civil Service, Local Government) often have 'flexible retirement' provisions allowing members to draw a reduced pension early while continuing to work, with the pension reduced for early payment. Rules vary by scheme.
Does phased retirement affect spousal pension entitlement?
Taking part of your pension during phased retirement may affect the spousal death benefit. Drawing from a defined contribution pot reduces the pot available for dependant's drawdown. Check your scheme's rules.
What is the tax on pension income during phased retirement?
Pension income (excluding the tax-free 25% PCLS) is taxable as earned income. Adding pension income on top of part-time salary can push you into higher rate tax. Planning the amount of drawdown per year minimises the combined tax burden.
Can I continue contributing to a pension during phased retirement?
If you have accessed flexible drawdown, the MPAA of £10,000 limits money purchase pension contributions. If you only take tax-free cash and haven't touched income drawdown, your full annual allowance (£60,000) remains available.
What is the difference between phased retirement and a drawdown strategy?
Phased retirement specifically combines work income reduction with pension access. A drawdown strategy refers to the method of withdrawing from a pension in retirement. You can use drawdown as part of phased retirement.
Is taking a DB pension early and working allowed?
Most DB schemes require stopping work for the sponsoring employer to draw the pension early (due to 'abatement' rules). However, you can typically work for a different employer. This limits phased retirement options for public sector workers with DB pensions.