Using flexible retirement to support retention

The required 10 per cent reduction in pensionable pay, as a result of a change in terms of employment, can only be assessed where there is active membership. This is consistent with partial retirement policies across other public sector pension schemes. 

NHS employees who have chosen to opt-out of the NHS Pension Scheme and do not wish to resume active membership can instead access all their pension benefits via retire and return. Since 1 April 2023, employees who retire and return are able to re-join the NHS Pension Scheme to build up further benefits if they wish to do so. 

For staff to partially retire, some reduction in pensionable workload is required, and as the NHS Pension Scheme records members’ pensionable pay, this is a reasonable way of assessing if members are taking steps towards retirement. This is also how partial retirement operates for members of the 2008 Section and 2015 Scheme in the NHS, and similarly for members of other public sector pension schemes. 

The requirement to reduce pensionable pay by a minimum of 10 per cent and maintain it at the lower level only applies in the first 12 months after partial retirement. After this, members can increase their pensionable pay again if they wish.

Yes. Members may take all or part of their pension while continuing to work for the NHS. As there is no break in service, their terms and conditions of employment will remain mostly unchanged. This includes annual leave entitlements. A change or amendment to the existing terms and conditions of employment is required in order to reflect the 10 per cent reduction in their pensionable pay.  

Employers may wish to discuss and agree new flexible working arrangements alongside partial retirement, such as part time working. Working flexibly in the lead up to final retirement may enable employees to achieve healthy working lives and to stay in the NHS for longer. 

Further detail is available in the chapter on flexible working for staff in the later stages of their career. 

When a member takes partial retirement, their local and national clinical excellence awards will continue. In partial retirement there is no break in service and the contract of employment continues. Further information on CEAs is provided in Schedule 30 of the consultant contract.  

Pensionable National Clinical Excellence Awards (NCEA) and National Clinical Impact Awards (NCIA) in transition will be paid pro-rata where staff reduce their hours as a way of accessing partial retirement, so for these individuals the reduction in award payments will go towards the 10 per cent reduction required. The new NCIAs, granted from 1 April 2022, are paid at the full rate regardless. 

Also, as with any job change, award holders and employers should discuss their partial retirement plans with the Advisory Committee on Clinical Impact Awards (ACCIA) secretariat as soon as possible to avoid losing their award or being required to re-apply early. 

Where a member has more than one employment, they must reduce their combined pay across all pensionable employments by at least 10 per cent. Pensionable pay is up to the maximum of whole time only. For example:  

A reduction is required so that the overall pensionable pay is no more than £72,000. This can be achieved by varying one employment or both. 

Employers may not be aware of all the employments their staff hold. During partial retirement discussions, employers should make members aware of the need to reduce their combined pensionable pay by 10 per cent, and of the abatement consequences should their pensionable pay exceed 90 per cent in the 12 months following partial retirement.  

If an employee chose to leave one of their employments to achieve the 10 per cent reduction, this action would fulfil the contractual change to their employment terms required to access partial retirement.  

The 10 per cent reduction in pensionable pay should be calculated in the same way for all employees. The reduction will be calculated based on the member’s previous level of pensionable pay for the 12 months before they take partial retirement, ending on the day they take partial retirement. Where a member has more than one employment, they must reduce their combined pay across all pensionable employments by at least 10 per cent. 

Given the sporadic nature of their work and the likelihood of having multiple employments, staff who work exclusively as locum and bank should be made aware of the consequences of breaching the 10 per cent reduction across all their pensionable work. The employee will no longer be eligible if the reduction is breached, and their pension payments will be stopped until their pensionable pay reduces again.  

Further information is available in the chapter on monitoring the 10 per cent reduction in pensionable pay.

Yes, employees can choose to relinquish their award to achieve the 10 per cent reduction.  

Relinquished national and local awards will not automatically be reinstated in the future and individuals would need to re-apply following the usual process. Awards cannot be paused or temporarily withdrawn for a year to fulfil the 12-month requirement for the 10 per cent reduction following partial retirement. 

A pensionable and consolidated pre-2018 award cannot be changed to become non-pensionable and non-consolidated. An individual may choose to relinquish their pre-2018 award and re-apply for a post-2018 award which would be non-pensionable and non-consolidated if granted, but their application would be subject to the usual assessment process. There would be no guarantee that their application would be successful.  

Local clinical excellence awards (LCEA) granted from 1 April 2022, and national clinical impact (NCIA) awards granted under the NCIA scheme from 1 April 2022 are non-pensionable and non-consolidated. Choosing to relinquish these awards would have no impact on an individual’s pensionable pay. 

LCEAs granted prior to 1 April 2018 under LCEA schemes in place as of 31 March 2018, and national clinical excellence awards (NCEA) granted under the NCEA scheme in place until 31 March 2022 are pensionable and consolidated.  

Additional programmed activities (APAs) 

Under Schedule 17 of the terms and conditions for consultants, programmed activities (PAs) which exceed the standard contractual limit of 10 are non-pensionable. Employers should ensure job planning processes and any supporting documentation clearly sets out that APAs are over and above the standard contract and are subject to regular review.  

Members wishing to reduce their PAs to meet the requirement for partial retirement while taking on APAs to maintain the same level of commitment will need to come to a mutual agreement with their employer. Employers should seek legal advice to ensure such arrangements are appropriate. More information is available in the chapter on processing the 10 per cent reduction in pensionable pay through the ESR payroll system. 

Allowances for undertaking management responsibilities 

Allowances will be non-pensionable if they are temporary and subject to review, or if they are linked to a non-pensionable PA that exceeds the standard contractual limit of 10 or more.   

Waiting list initiative (WLI) payments 

WLI payments should be non-pensionable if the activity exceeds whole-time or if the payment is made as a one off bonus. 

Weekend and on-call payments 

Availability allowance for on-call work is only pensionable if there is a specific rota commitment that an individual is paid for on a regular basis.

Local payments

Further information is available on the NHS Pensions website.  

The first assignment is created as if the employee is a member of the NHS Pension Scheme and contains all the hours and elements of pay which should be counted towards pensionable pay. The second additional assignment is created as if the employee has opted out of the pension scheme. Any payments made under this assignment will not attract pension contributions or count towards pensionable pay. Therefore, if ESR is incorrectly treating a payment as pensionable, this payment could be moved to the second assignment to correct the situation. 

This local solution may be effective when used for a small number of staff. However, extra work is required to create additional assignments on ESR, which could be time consuming if large volumes of applications for partial retirement are received. Staff may also raise additional queries in relation to their tax and national insurance contributions and may need help understanding how the information is displayed across their two pay slips. 

Please note, this solution does not involve creating two contracts of employment to achieve the reduction in pensionable pay. This solution involves creating two assignments if an employer is not able to process an agreed change to pensionable pay on ESR.

The downside to this approach is that the adjusted payment on the non-pensionable pay elements may need to be manually maintained in respect of any pay changes, such as the pay award, and could impact other payments that rely on basic pay for the calculation, including duty or HCAS payments. 

DHSC is exploring more efficient and automated solutions, however this will require system development and will take time. 

To assess whether the member’s pay has reduced by at least 10 per cent for the first 12 months the pay received from NHS employment will be grossed up to the full year. This is achieved by the following calculation: Pay in period working for NHS x 365 ÷ number of days = Pay for 12 months. 

When a person leaves NHS employment, they are no longer an active member of the scheme. Any pay made after leaving will not be classed as pensionable in the NHS Pension Scheme. Providing a person has not breached the 10 per cent reduction rule using the calculation above, any pensionable pay they earn outside of the NHS, in the 12 months following their partial retirement date will not count.  

Some staff may remain a member of the NHS Pension Scheme after leaving NHS employment. For example, those who TUPE transfer to a new employer on their NHS terms and conditions, and those who move to direction employers that provide access to the NHS Pension Scheme. In these cases, the 10 per cent reduction in pensionable pay will remain in place for the 12 months following their partial retirement date.  

No. The 16-hour rule was permanently removed from 1 April 2023.  

Previously, pension payments would be suspended under the 16-hour rule if a member of the 1995 Section worked more than 16 hours per week in the first month after taking retirement benefits. The permanent removal of the 16-hour rule will make it easier for retired staff to continue to work in the NHS. 

Members who are applying for partial retirement should consider a number of factors when deciding how much of their pension they wish to take. Employers may wish to signpost the individual to the following points for consideration: 

The McCloud remedy is the process of removing the age discrimination that was judged to have arisen in public service pension schemes, including the NHS Pension Scheme. Employees who joined the NHS Pension Scheme on or before 31 March 2012 and who were still members of the scheme on 1 April 2015 are eligible for the McCloud remedy. 

The regulations for the McCloud remedy came into effect on 1 October 2023, and NHS Pensions are working to offer eligible active members their choice at the point they retire from April 2024. 

If a member who is eligible for the McCloud remedy chooses to retire before April 2024, they will be contacted within 12 months of their partial retirement date and asked to choose between keeping their benefits in respect of the remedy period (that is, 1 April 2015 – 31 March 2022) in the 1995/2008 Scheme or the 2015 Scheme. 

Their upcoming McCloud choice means there are other factors for them to take into account when deciding how much of their pension they wish to take. Their McCloud choice could affect their personal tax position, or their final salary link, if they have one. If the member chooses to move their benefits for the remedy period into the 2015 Scheme, they may have effectively been overpaid and may be required to pay this back to the scheme. NHS Pensions has developed the McCloud percentage tool to allow members to see what percentage pension they can take to help avoid any later impacts from their McCloud choice. Further information about the McCloud percentage tool is available on the NHS Pensions website. 

NHS Pensions has developed two calculators to help members decide how much of their pension they wish to take.   

The employer and the employee must come to an agreement on how to reduce the member’s pensionable pay before the member’s application for partial retirement can proceed. How to do this will differ depending on the individual's situation and the organisation's service needs. We recommend that the appropriate representatives from the organisation be involved in conversations to agree on bespoke arrangements.  

Employers should support applications in the majority of cases, given that partial retirement has benefits for employers as well as staff. However, there may be situations where employers feel they are unable to accommodate the application. If the employee and the employer are unable to identify and agree on a way of reducing pensionable pay by 10 percent and maintaining that position for 12 months, the member will not be able to take partial retirement at that time. In these circumstances, the member may consider other flexible retirement options or choose to appeal the decision.  

Employers and trade unions should work in partnership to agree arrangements for a standard appeal process which is accessible to all staff. It is vital that employers ensure that they are using fair, consistent and objective approaches when deciding whether requests can be agreed. Data monitoring and reporting are also essential in providing employers assurance that equity and fairness are being maintained, for all flexible retirement requests. 

All flexible retirement requests should be handled in line with the national principles set out in section 33 of the NHS Terms and Conditions of Service Handbook. The NHS Staff Council has also produced flexible retirement guidance, covering the application and appeals process. 

Yes. Partial retirement is one of the flexible retirement benefits offered by the NHS Pension Scheme and is available to all members who meet the eligibility criteria. 

Employers may decline a partial retirement request if, after discussion, a mutual agreement between the individual and the organisation cannot be reached. Employers cannot refuse to offer partial retirement to eligible staff in the first instance, without exploring it as a mutually viable option first.

When members retire and return, they must leave employment, their existing contract of employment ends, and they must enter a new contract of employment with their employer. 

We believe it is good practice for employers aiming to retain valuable and experienced staff to offer the same terms and conditions of employment after retiring and returning. Offering the same terms and conditions, including pay, annual leave and sick pay, may encourage experienced staff to continue working if they want to claim their pension, and it could help to attract staff who have recently retired back to work.  

This is an effective way of making sure experienced employees feel rewarded, recognised and valued for their hard work, service and dedication over many years.

When members take partial retirement, a break in employment is not required and members will automatically retain the same contract of employment.

National award holders, who begin receiving their pension after 1 April 2023, will retain their award. This is subject to the standard scheme rules around job changes where any changes to working arrangements are made as a consequence of retire and return.  

Any breaks in service are assessed on a case-by-case basis. Significant breaks in service may result in loss of the award. We would expect the longer the break, the greater the chances of losing the award.  

As with any job change, award holders and employers should discuss job change plans with the Advisory Committee on Clinical Impact Awards (ACCIA) secretariat before the job change has been implemented to avoid losing the award or being required to re-apply early. 

Terms and conditions for local award holders are set out in Schedule 30 (last updated January 2023). With effect from 1 April 2023, a consultant with a pre-2018 LCEA who retires and returns to the same employer will retain their pre-2018 LCEA. 

Prior to 1 April 2023 existing LCEAs cease on retirement, meaning consultants who had already retired prior to 1 April 2023 have lost their pre-2018 LCEAs and will not maintain these on returning. 

Further information on CEAs is provided in Schedule 30 of the consultant contract.  

For the vast majority of scheme staff, retiring and returning to work in the NHS will not affect the pension payments they receive from the scheme. However, in a small number of cases, abatement may apply. Abatement is where a member’s NHS pension is reduced if their earnings on returning to work, plus their pension benefits, exceed the amount the individual earned shortly before they retired. 

Abatement will not apply if the member retires: 

Abatement may apply where a member returns to work before their normal pension age, after retiring: 

*Important note – DHSC has suspended abatement for members with special class status until 31 March 2025 as part of a series of temporary measures to help retired staff to return to the NHS to boost workforce capacity during the pandemic and subsequent recovery of elective care. DHSC are consulting on proposals to permanently remove special class status abatement from 1 April 2024.  

Where abatement applies, retired staff can still return to work, but they may need to work fewer hours to ensure their pension payments are not reduced. Members can contact NHS Pensions for clarification of how much they can earn without affecting their pension. 

Where abatement does apply, it will cease when the member reaches normal pension age. At that point, the pension payments will return to their pre-abatement value. 

Abatement may also apply where a 10 per cent reduction in pensionable pay is not achieved for the first 12 months following partial retirement. 

Further information is available in the partial retirement chapter.

No. The 16-hour rule was permanently removed from 1 April 2023.  

Previously, pension payments would be suspended under the 16-hour rule if a member of the 1995 section worked more than 16 hours per week in the first month after returning to work from retirement. The permanent removal of the 16-hour rule will make it easier for retired staff to return to work in the NHS.