If you’re a member of the NHS Pension Scheme, and you plan to retire and return to work, then you need to be aware of abatement, what it means and how it could affect you.
If you’re thinking of retiring from the NHS and then returning to work, you need to be aware of abatement and the changes that were introduced in 2008. Whilst the rules were relaxed, many NHS Pension Scheme members do not fully understand abatement and the potential implications.
What is a pension abatement?
Highly simplified, abatement occurs when a member’s pension is reduced on a pound-for-pound basis if they return to work after retirement. Specifically, abatement applies when a member’s post-retirement earnings plus pension exceeds their pre-retirement earnings.
What are the NHS pension abatement rules?
The NHS Pension abatement rules changed on 31st March 2008. Prior to this date, abatement affected all members of the NHS Pension Scheme who retired and returned to work.
Now, abatement affects very few people as it will not apply to anyone who retires on or after their normal pension age, or equally anyone who retires early with any form of actuarial penalty.
Remember your normal NHS pension age is determined by which section and/or scheme you are in. If you are a member of the 1995 section this is age 60, in the 2008 section this is age 65, and in the 2015 scheme it is your state pension age.
If you reach the normal retirement age for your scheme you can retire and return to work without any risk of abatement. However, you must fulfil the 24-hour retirement rule and, in the 1995 section, in your first month back at work, you cannot work for more than 16-hours per week.
For some, however, the abatement rules still apply:
- Choosing to retire from the NHS pensions scheme early: If you have chosen to retire from the NHS Pension Scheme early and have received any form enhancement and subsequently return to work, then your enhancement could be reduced or stopped completely. This enhancement could be received for a number of reasons including:
- On attaining ill health retirement – take care as this could either be a tier one or tier two ill health pension. Whilst a tier one pension does not offer a physical enhancement, the pension awarded can be taken without penalty and as such this additional amount could be abated.
- If you have Mental Health Officer (MHO) status and decide to retire and return between the ages of 55 and 60. Up to the age of 60 your post-retirement NHS earnings* cannot exceed your pre-retirement pensionable income.
*This includes any income from a direction employer. If however, you choose to work in the private sector, then your earning capacity would be unlimited, regardless of your pension value.
Content correct at time of writing and is intended for general information only and should not be construed as advice.