Should I contribute to a pension after age 68?

Q. I’m 68 and don't need a retirement income currently. Should I just keep contributing to my pension until I do?

A. As retirement becomes more flexible, and part-time and remote working enable more of us to work longer, this is a question more people are asking. If you’ve reached your late 60s, but you’re still working and don’t need to draw an income from your pension yet, does it make sense to keep contributing?

The answer will depend on your personal circumstances, but there are several key factors to consider.

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1. You can usually keep contributing – and still receive tax relief

You can usually contribute to a pension and receive tax relief up until age 75. If you’re still earning, you can typically contribute up to 100% of your relevant UK earnings each tax year (subject to the annual allowance) and benefit from tax relief.

For many people, this is one of the biggest advantages of continuing to contribute. Pension contributions receive tax relief at your highest marginal rate. So, if you’re still paying income tax at 20%, 40% or 45%, pension contributions can be a highly tax-efficient way to save.

Even if you’re no longer working, you can still contribute up to £3,600 gross per tax year (that’s £2,880 net plus basic rate tax relief), provided you’re under 75.

However, you’ll need to keep an eye on the annual allowance (currently £60,000 for most people, though this can be lower in certain circumstances).

If you’ve already started taking flexible income from your pension, the Money Purchase Annual Allowance (MPAA) may apply, reducing how much you can contribute tax-efficiently to just £10,000 per year.

2. Your pension can continue to grow tax-efficiently

If you don’t need income yet, leaving your pension invested can allow it to continue growing in a tax-efficient environment. Investments within a pension grow free of UK income tax and capital gains tax.

This can be particularly attractive if you have other sources of income – such as employment earnings, rental income, or other savings – and don’t need to access your pension to meet your day-to-day living costs.

However, remaining invested also means remaining exposed to market risk. As you get older, it’s worth reviewing your investment strategy to ensure it still reflects your goals, time horizon and attitude to risk.

3. Think about tax efficiency over the longer term

Even if you don’t need an income from your pension now, you probably will in the future. Planning ahead can help you avoid paying more tax than necessary.

You might consider whether it makes sense to start drawing some income earlier in smaller amounts to use up your personal allowance each year, rather than deferring and potentially pushing yourself into a higher tax band later.

For example, if you are a basic rate taxpayer now but are likely to become a higher rate taxpayer once you start drawing down on your pension, it could make sense to take a small, regular amount from your pension now whilst staying within the basic rate tax bracket.

You’ll also want to think about how your pension interacts with your State Pension and any other taxable income. From age 66 (rising to 67), the State Pension becomes payable and is taxable, which may affect your overall tax position.

You may also need to consider how drawing any additional income might affect your entitlement to any means-tested benefits.

4. Consider estate planning

Pensions can play a valuable role in estate planning. Currently, pension funds sit outside your estate for inheritance tax (IHT) purposes, although this is changing from 2027.

While retirement pots remain outside the scope of IHT, leaving money invested in your pension – and using other assets first – can be an efficient way to pass on wealth. Once the rules change, however, you will need to reassess.

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5. Your wider financial picture matters

Ultimately, whether you should continue contributing depends on your broader financial situation:

• Are you still earning and paying income tax?
• Do you have sufficient accessible savings outside your pension?
• Are you likely to need the money in the short to medium term?
• Are you approaching age 75, when different tax rules can apply?
• Have you already accessed your pension flexibly, potentially triggering the MPAA?

For some, continuing contributions can be a smart and tax-efficient strategy. For others, it may make more sense to build up accessible savings, reduce risk, or begin drawing an income in a controlled way.

Please remember this article is not financial advice. Pension and tax rules can change and their impact will depend on your individual circumstances. If you’re unsure about what’s right for you, you should speak to a qualified financial adviser.

You can find out more about Fidelity’s advice service here.

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• Read: 6 money mistakes people make in their 60s
• Read: How to create a retirement plan in 15 steps
• Read: What income might I get from a £500,000 pension?

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised Fidelity’s advisers or an authorised financial adviser of your choice. .