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Retire and return to the NHS: 24-hour retirement explained

The NHS Pension Scheme allows doctors to take their retirement benefits and then return to work, providing crucial financial planning flexibility, a phased move into retirement or even a useful tax charge mitigation tool.

Doctors approaching the normal retirement age set out in their section of the NHS Pension Scheme have a decision to make. While many will be ready to retire at these ages – 60 in the 1995 section of the scheme and 65 in the 2008 section – there is no compulsion to do so; you could simply continue working, but the other option is to take advantage of the “24-hour retirement” rules, sometimes known as “retire and return”.

Under these rules, doctors are entitled to retire, take their pension benefits, including both their tax-free cash lump sum and an ongoing income, and then return to full-time or less than full-time NHS employment. You can do this at any age above the minimum retirement age set out in your section of the NHS Pension Scheme.

Doctors often opt for 24-hour retirement for lifestyle reasons. For example, you may want to move into retirement gradually, rather than going from full-time work to complete retirement; returning less than full-time after drawing your pension can help you do this while maintaining your income. Or the money released from your pension could be used for purposes such as funding children’s university education or the purchase of a first home – or for many other financial planning needs.

Retire and return could also be useful for those in danger of breaching the lifetime allowance, which sets strict limits on the value of pension benefits at the point of retirement. Where you retire before the normal retirement date of the NHS Pension Scheme, your pension will be reduced according to a fixed actuarial calculation; it is this reduced pension that is considered when calculating whether a lifetime allowance tax charge is payable. Careful forward planning means utilising 24-hour retirement before your normal pension age could be a useful tax mitigation strategy.

How the rules work

The most important element of the retire and return rules is that you must take a break of at least 24 hours from all NHS employment before returning to work. This is necessary to prove that your contract of employment has been severed or, in the case of self-employed GPs, that you’ve come to the end of your partnership.

Moreover, once you’ve returned to work, you are not allowed to work for more than 16 hours a week in the calendar month after your return. This rule applies strictly to each week; for example, you can’t work 12 hours one week and then 20 hours the next.

It’s important to plan 24-hour retirement carefully: make sure your return to work arrangements are agreed well in advance and that you understand the terms agreed.

If you’re employed, you will need your employer’s permission to retire and return, and you should make sure you have agreed a new contract of employment, in writing, before you give formal notice of your intentions. Bear in mind that you may have to accept a “non-substantive” contract; this is a non-permanent contract that has to be renewed periodically – typically annually. Also, if you currently have clinical excellence awards or discretionary points that boost your income, you will lose these on retirement.

Similarly, if you’re a GP, you will need the permission of your partners to retire and return. You should also take specialist advice on reviewing and renewing your practice agreement from a firm such as BMA Law. One important issue to consider is who will retain the employer’s element of your pension contributions following your retirement and return to work, when these will stop. Will this money come to you or be shared?

Traps for the unwary

By planning ahead, it will be possible to avoid getting caught out by any unexpected consequences of 24-hour retirement. However, the biggest problem faced by many doctors is that their NHS trust is unwilling to agree to them retiring and returning. In some cases, NHS trusts are completely against this practice, while in others they may only be prepared to consider it in certain areas – perhaps in specialities where posts are hard to fill, for example.

Doctors may need to make their case individually. One compelling argument to put to the trust is that they will make a substantial saving on the employer’s contribution to the NHS Pension Scheme they must currently make on your behalf. This is 14.38% of your pensionable pay in England and Wales, rising to 14.9% and 16.3% in Scotland and Northern Ireland respectively.

Mental health officers, who currently have the option of retiring at the age of 55 without penalty, also need to consider the issue of abatement. This is the process by which your NHS pension is reduced if your earnings on re-employment in the NHS, plus your NHS pension, exceed your pre-retirement NHS pensionable earnings. Check the position carefully, though bear in mind that the rules don’t cover income from private work; working less than full time in the NHS may also mitigate this issue.

Overall, however, doctors who prepare carefully for 24-hour retirement find the arrangement works very well for them. And while there have been scare stories in the past that HM Customs & Revenue has been looking at retire and return, this is not the case.

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

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