Reducing working hours prior to retirement

Flexible retirement schemes allow a change in mindset when it comes to reducing working hours leading up to retirement.

Tips for a smooth reduction in working hours

Talk to your family

If you live with a partner of a similar age, speak with them ahead of time to find out if they have similar or different ideas about retirement.

If they’ve been expecting you both to take a traditional ‘cliff edge’ retirement - so you have time to spend together, for example - they might be upset to hear that you’ll be continuing to spend time at work. Alternatively, they might also be keen on working into their retirement, in which case there might not be so much of a problem.

In either case, speaking with your partner early could prevent any problems from arising later on.

Talk to your employer

Reducing your working hours might be relatively straightforward for you, but it can cause challenges for your employer. For example, they might need to bring in someone part-time to cover the hours you no longer work, or they might need to train up a more junior employee to share some of your responsibilities.

Once you’ve decided that reducing your hours prior to retirement is right for you and your family, you’ll want to speak with your employer so they have plenty of time to consider your request and plan accordingly.

Plan your finances

A reduction in working hours is likely to result in a reduction of income. This can put pressure on both your personal lifestyle aspirations and your family finances.


  • Will you still earn enough to cover your current outgoings?
  • Might your partner be willing to cover a shortfall with their salary?
  • Could you get by on a lower income by cutting some of your current outgoings?
  • Will you need to supplement your income, by accessing savings or your pension?

Also read: How much pension do I need to retire at 55?

Check the terms of your pension

If you plan to dip into your pension to supplement your lower salary, check the terms first.

Each pension provider has different rules about accessing your pension, including:

Also read: Taking an early pension

Flexible retirement

Working fewer hours could significantly reduce your income. You could supplement this by drawing down cash from your pension while continuing to work, which is known as flexible retirement (or phased retirement).

The impact on your taxes

While 25% of your pension can be drawn down tax-free, the remainder will count towards your taxable earnings. So your combined work and pension income could push you into a higher income tax bracket.

For example, supplementing a £30,000 salary with £30,000 of taxable pension drawdowns would make you a higher rate taxpayer. You’d need to pay 40% tax on earnings above £50,270.

However, if you drew down just £10,000 a year on top of your £30,000 salary, you’d be a basic rate taxpayer and pay just 20% tax on your income over £12,570 as a result.

Tax can be complicated, so you may want to seek advice from a financial adviser.

Also read: How does pension drawdown tax work?

The impact on your pension

The purpose of your pension is to support you throughout the entirety of your retirement - for most people, that averages around 20 years. But your pension might need to last 30 years if you live into your 90s, and even longer if you start drawing down money from it as soon as you turn 55 (57 from 2028).

Accessing your pension at 55 (57 from 2028) reduces the amount of time it has to grow, which could significantly reduce your annual income. It could even cause your pension to run out while you’re still alive, leaving you to rely solely on the State Pension.

If you’re unsure whether your pension will last if you access it early, speak with a financial adviser.

Reasons to consolidate your pension

By the time you retire, you might have accumulated a large number of pensions from different employers. This could make the process of managing and accessing them extremely tedious - and possibly expensive if there are expensive fees to pay.

Consolidating your pensions into one plan could save you considerable time and money as a result.

If you think you could benefit from bringing all your pensions together into one easy-to-manage plan, consider PensionBee - the UK’s leading online pension provider.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

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