More flexible retirement from the NHS Pension Scheme

Proposals to change the rules on continuing to work after you’ve begun taking benefits from the NHS Pension Scheme will give you more options.

While there are no quick fixes for the NHS’s staffing difficulties, the Government hopes encouraging more doctors and dentists to continue working for longer will be part of the solution. It has therefore proposed a series of changes to the NHS Pension Scheme that will give members more flexibility about when and how they retire. That’s good news – it gives you more options later in your career.

The headline change is that from April 2023, all members of the NHS Pension Scheme will have the option of taking retirement, taking their benefits, and then going back to work, where they will be able to earn further pension rights. It’s important to recognise that for now, these are just proposals at the time of writing from the Department of Health and Social Care (DHSC), with some coming into effect on 1 April and others on 1 October.

How the new arrangements will work.

The new rules are known as “Retire and Re-join”. They recognise that many doctors and dentists reaching the age at which they are entitled to start drawing their NHS Pension would like to do so but aren’t necessarily ready to give up work altogether. So, under the new rules from April 2023, you’ll be able to retire, take your full pension, and then return to work and re-join the 2015 NHS Pension Scheme in order to earn further benefits. The only caveat is that must take a break of at least 24 hours between retiring and re-joining.

In fact, this option is already available to members of the 2008 section of the NHS Pension Scheme and the 2015 NHS Pension Scheme itself. From 1 April, however, the flexibility is being extended to everyone, including members retiring with benefits from the 1995 section of the NHS Pension Scheme.

Importantly, you can return to the NHS – and even increase your working commitments if you want – without having your pension payments reduced or stopped (a process known as “abatement” in the NHS Pension Scheme’s jargon used to apply in certain circumstances if you claimed your pension benefits before your scheme normal retirement date).

There will also be no barriers to earning additional pension rights. Even if you have a full 45 years of service in the 1995/2008 NHS Pension Scheme, you can go back to work and earn benefits from the 2015 scheme; the only limitation here is that you must be below the age of 75.

Moreover, from April 2023 if you do return to NHS work after your minimum 24-hour break, you can work as many hours as you choose straightaway. Until now, members of the 1995 section were limited to working a maximum of 16 hours a week in the first month after their retirement if they did not want their pension payments to be affected.

Partial retirement made easier.

The DHSC proposals also make it easier to take partial retirement. From October 2023, the proposed rules will allow you to claim your pension and then work in a more flexible way without having to leave your current job. Again, this is already an option in relation to benefits you have earned in the 2008 section and the 2015 scheme, but the same arrangements will be extended to the 1995 section.

Under the proposal, from age 55, you will be able to take between 20% and 100% of your pension benefits in one or two drawdown payments without having to leave your job.

Members of the 1995 section who have a protected minimum pension age of 50 will also be able to claim pension benefits without quitting. Between the age of 50 and 55 they will need to take the full 100% if they want to exercise this option. After age 55, the new rules apply, with the option of taking between 20% and 100% in one or two drawdown payments.

Those who take up this option will still be able to continue building pension rights in the 2015 NHS Pension Scheme. You won’t need to take a break or change jobs; the only caveat is that you’ll need to reduce your pensionable pay by 10%. Dental practitioners will need to reduce their NHS commitments by 10%.

More changes to come.

Alongside more flexible retirement rules, the DHSC is proposing a series of other minor changes to the NHS Pension Scheme. One notable reform is a move in the date on which pensions from the 2015 scheme are reviewed each year.

Currently, increases to your future pension entitlement to reflect the cost of living are made on 1 April each year. The size of the increase is based on the consumer price index (CPI) measure of inflation as of September in the previous year; you get an increase of CPI plus 1.5% so that your pension is always increasing ahead of inflation.

From this year onwards, however, this “revaluation” process will take place on 6 April instead. For dental practitioners, who also get the same revaluation of their 1995 and 2008 NHS Pension Scheme pensions, the same change applies.

The aim is to align the process of revaluation with the process through which you work out how much your pension benefits have grown by over the tax year when you’re checking your pension growth against the annual allowance. The latter will now only take into account growth in pension benefits above inflation.

Once you start receiving your pension, you’ll continue to get a review each year to protect you from inflation. This is known as the “pensions increase”.

Content is correct at 1st March 2023 of writing and is intended for general information only and should not be construed as advice.

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