More flexibility for doctors at retirement

The Government’s overhaul of the “retire and rejoin” rules in the NHS Pension Scheme could give you valuable new benefits as you move towards retirement

Government efforts to bolster the NHS workforce and retain senior doctors give you more choice about how and when you retire. Changes made to the NHS Pension Scheme give you valuable flexibility: The headline reform is that since April 2023 all members of the NHS Pension Scheme are now entitled to retire, begin taking their full pension, and then to return to work and to rejoin the scheme, where they can earn additional pension benefits. The only stipulation is that you must take a break of at least 24 hours between retiring and returning to work.

This could be hugely useful if you don’t want to retire fully, for example. You could return to work on reduced hours or in a part-time role, using your NHS pension benefits to supplement your lower earnings. In addition, you’ll be able to build up further pension entitlement from your continuing work.

The new rules are very flexible. For example, even if you have 45 years of service in the 1995 and 2008 sections of the NHS Pension Scheme, you can return to work and earn new benefits in the 2015 scheme, as long you haven’t yet reached your 75th birthday.

Also, if you do decide to retire and then to rejoin the NHS, you can work as many hours as you like in your new role from day one. Previously, members of the 1995 section of the NHS Pension Scheme were limited to working no more than 16 hours a week in the first month after retirement to avoid their pension payments being affected.

Check the abatement rules

The one caveat here is that you may need to be mindful of the rules governing “abatement”, which could see your NHS pension reduced. This process could kick in if the combination of your earnings on rejoining the NHS and the unearned element of your NHS pension exceed your pre-retirement pensionable earnings from your NHS work.

Abatement might apply if you’re under the normal pension age of the NHS Pension Scheme – 60 in the 1995 section, 65 in the 2008 section, or your state pension age in the 2015 scheme – and you return to NHS employment following retirement on the grounds of ill-health. It could also apply if you return following the early payment of a deferred pension on the grounds of ill-health, or if you retire in the interests of efficiency of the service.

Note that abatement for those with Special Class or Mental Health Officer status has been suspended until 31 March 2025. Until then, if you have that status from age 55, you will be able to return to NHS employment or increase your working commitments without having to worry about a reduction in your pension payments. From 1 April 2025, you will potentially be subject to abatement in the normal way until you reach age 60.

More flexible working

The other notable change under the Government’s reforms takes effect from 1 October 2023. From then, you will be able to claim your pension from the 1995 section of the NHS Pension Scheme without having to leave your job. This is already an option in the 2008 section and in the 2015 scheme.

Under this rule change, those with 1995 section benefits will be able to take between 20% and 100% of their pension in one or two drawdown payments, with no need to leave their current job. They will be able to carry on working without a break – and to continue building up pension benefits in the 2015 scheme.

This entitlement is known as partial retirement. The idea is that it gives members a way to retire more gradually; they can use their 1995 section entitlements to generate additional income as they reduce their working hours, while still earning future pension benefits.

As such, to benefit from partial retirement, you must see a 10% reduction in your pensionable pay (a 10% reduction in commitment for GPs) in the 12 months after you draw down from the 1995 section. This is the same rule as already applies in the 2008 section and the 2015 scheme.

The bottom line, however, is that the NHS Pension Scheme now makes it easier for you to manage your retirement over a period, rather than simply stopping work completely at one time.

The NHS will provide guidance on programmed activities that are to be made non-pensionable. More broadly, it may make sense to get professional financial advice on the best way for you to take advantage of the new rules, given your current situation and your future plans and requirements.

Content correct at time of writing and is intended for general information only and should not be construed as advice.

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