Yes mate, you can carry on working. Provided you made the PSW application before your IGS leave expired, your leave is treated as 'continuing' while your application is being considered.
For proof, this is an extract from section 118 of the National, Immigration and Asylum Act 2002:
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118 Leave pending decision on variation application The following shall be substituted for section 3C of the Immigration Act 1971 (c. 77) (continuation of leave to enter or remain pending decision on application for variation)—
“3C
Continuation of leave pending variation decision
(1) This section applies if—
(a) a person who has limited leave to enter or remain in the United Kingdom applies to the Secretary of State for variation of the leave,
(b) the application for variation is made before the leave expires, and
(c) the leave expires without the application for variation having been decided.
(2) The leave is
extended by virtue of this section during any period when—
(a) the application for variation is neither decided nor withdrawn,
(b) an appeal under section 82(1) of the Nationality, Asylum and Immigration Act 2002 could be brought against the decision on the application for variation (ignoring any possibility of an appeal out of time with permission), or
(c) an appeal under that section against that decision is pending (within the meaning of section 104 of that Act).
(3) Leave extended by virtue of this section shall lapse if the applicant leaves the United Kingdom.
(4) A person may not make an application for variation of his leave to enter or remain in the United Kingdom while that leave is extended by virtue of this section.
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