Flexible Retirement Options for NHS Staff
This article aims to help members understand the upcoming changes to pension regulations around flexible retirement. The NHS Business Services Authority (NHS BSA) and NHS Employers have plenty more information to share with members and we’ve put a few links at the bottom of this article for more information.
This article explores the policy options available to NHS Pension Scheme members and we strongly encourage members to seek financial advice on pension choices based on their individual circumstances. Members can access Lighthouse Financial services as part of UNISON’s member benefits.
Members who retire need to notify UNISON to update their membership to ensure they remain members.
What is changing? From 1 April 2022, all active pension scheme members in the NHS are in the 2015 Section of the NHS Pension Scheme. Many NHS staff will have accrued pension benefits in either, or both, of the two closed, or legacy, schemes (1995 section and 2008 section).
New flexibilities coming in from 1st October 2023 mean NHS staff, who are current members of the NHS pension scheme, will have options to use their accrued pension benefits to achieve a better work life balance. For example, to reduce their hours or drop down to a less stressful role and use their built up pension to supplement their income.
They can soon do this without needing to break their service and can continue earning and still paying into a pension.
These new retirement flexibilities apply to the NHS Pension Scheme in England & Wales and in Scotland.
They do not yet apply to the HSC scheme in Northern Ireland although they are being consulted upon at the moment and expected to come in from April 2024.
What are the options?
There are currently two options which we will explore in more detail. Retire and return, which has been in place since April 2023 and Partial retirement (draw down), which comes into force from 1 October 2023.
Retire and return
This option allows someone with pension scheme benefits in one of the legacy schemes to retire pull down their pension benefits and return to NHS employment whilst continuing to build up further pension benefits in the 2015 Scheme.
Scheme benefits in the 1995 section do not increase in value after someone has passed their Normal Pension Age (normally 60 in the 1995 scheme). So once someone is over 60 they might want to claim these benefits but continue working.
The change from April 2023 means NHS staff can now retire, claim their pension, return to work and pay into the 2015 scheme.
The Normal Pension Age for the 2015 scheme is 65 or the state pension age, whichever is greater. To check a members NPA visit https://www.gov.uk/state-pension-age
What are the implications?
There are a few considerations to make with this option. Firstly, if scheme members want to draw down their pension benefits before their Normal Pension Age, they will be reduced as they are being paid early – this is called Actuarial Reduction. How soon they can do this and how reduced they will be is dependent on their specific circumstances. The NHS BSA website is the best place to find more information on Actuarial Reduction.
Secondly, they have to break their employment and return on a new contract. Whilst there is no automatic right to return on a new contract, employers do need to consider requests. Members should get advice and agree terms before terminating their contract.
Depending on what the employer is able to offer, members could return on to their old post, maybe on reduced hours, or a new post. More commonly employers offer a bank contract. Contractual rights are different for each option.
A bank contract might be a great option for people who want to return on a flexible contract and just do a few shifts “as and when”. However, a bank contract does not normally pay “Agenda for Change” sick pay in the event of illness. Bank contracts do not guarantee work, so our advice is to check terms carefully when considering this option.
Before retiring and returning, the advice is to speak to the line manager and HR to see what terms they will offer.
Partial retirement (draw down)
Changes coming in from 1 October 2023 will allow members of the 1995 scheme to take partial retirement without having to break their NHS employment.
With the agreement of their employer, eligible scheme members* can draw down all, or some, of their pension and continue in NHS employment – thereby preserving their NHS terms and conditions.
This benefit is already in place for staff with pension benefits in the 2008 or 2015 sections and will be available for people in the 1995 section from 1 October 2023.
*To be eligible for partial retirement you must:
· have reached your minimum pension age
· be an active member of the Scheme
· reduce your actual pensionable pay by at least 10% (for GP’s, Dental Practitioners, Ophthalmic and non-GP Providers a 10% reduction in commitment is required)
· have a change in your terms and conditions of employment following the reduction in pensionable pay
· have had the previous level of pensionable pay prior to partial retirement for at least 12 months
· expect your new level of pensionable pay to last at least 12 months from the point partial retirement is taken
· not have already claimed partial retirement on two occasions.
What are the implications?
Members may take from 20 per cent up to 100 per cent of their pension benefits in one or two payments, without having to leave employment.
Members must reduce their pensionable pay by at least 10 per cent before taking partial retirement.
If pensionable earnings increase above 90 per cent of former earnings, then pension payments will stop.
Similarly, to retire and return, the employer needs to agree to the reduction in earnings through some route. This could be by moving to a lower paid role, reducing hours or some other way. To apply for partial retirement, members should follow the same process as for flexible working – using Section 33 of the NHS Terms and Conditions.
FAQs
What resources are there to help members decide?
The NHS BSA are the scheme administrators and their website it packed full of guides, factsheets and video explainers (see some links below). This is a good place to start for estimations of pension www.nhsbsa.nhs.uk/member-hub/getting-estimate-your-pension
Employers also have a role in providing advice including pension forecasts.
A partial retirement calculator is in development, and we will link it here once it is ready.
For partial retirement (drawdown), how will reducing earnings by 10% affect part-time workers who have already reduced their hours?
members should talk to their employer and agree how this will operate so as to not prevent part time staff from accessing the new partial retirement benefits. To access partial retirement, pensionable pay needs to be reduced by 10%. At the moment, additional hours for part-time staff (above contracted hours but below 37.5 hours) and overtime (above 37.5 hours) are not pensionable.
So, it would be possible for someone to either reduce hours or drop to a lower paid role to reduce pensionable pay below 90%. Staff could then work additional hours and/or overtime as long as this is not pensionable.
Employers may offer bank contracts as a way to work additional hours and overtime*
*“Employees who are employed on bank contracts may choose to opt out of the NHS Pension Scheme in respect of their bank employment, whilst continuing to be a member of the NHS Pension Scheme in respect of their substantive contract of employment. This flexibility may allow the individual to reduce their hours and pensionable pay under their substantive contract of employment, whilst working additional capacity and maintaining their income on a non-pensionable basis under the terms of their bank contract.” NHS Employers advice
This may work for individuals seeking flexible retirement; however, UNISON is opposed to employers moving overtime onto bank contracts more generally.
How does enforced overtime impact on the hours/earnings reductions?
Overtime is not pensionable so this would not count against the 10% reduction in earnings.
Resources for further reading
UNISON
Pension’s Unit Briefing https://www.unison.org.uk/content/uploads/2023/06/NHSPS-Retirement-Flexibilities.docx
Flexible working https://www.unison.org.uk/at-work/health-care/big-issues/flexible-working-for-nhs-staff/
NHS Business Services Authority
Partial retirement – Member factsheet https://www.nhsbsa.nhs.uk/member-hub/your-options-flexible-retirement/partial-retirement
NHS BAS YouTube channel https://www.youtube.com/@TheNHSBSA/videos
Understanding partial retirement – Video explainer https://youtu.be/OayK0jvqN1E
NHS Pensions Retire and return – guide for employers https://www.nhsbsa.nhs.uk/sites/default/files/2023-03/NHSPensions_Employer_RetireandReturnGuide
Retirement guidance https://www.nhsbsa.nhs.uk/employer-hub/technical-guidance/retirement
Getting a pension estimate www.nhsbsa.nhs.uk/member-hub/getting-estimate-your-pension
NHS Employers https://www.nhsemployers.org/publications/using-flexible-retirement-support-retention https://www.nhsemployers.org/system/files/2023-06/using-flexible-retirement-to-support-retention
https://www.england.nhs.uk/looking-after-our-people/the-programme-and-resources/pensions-and-flexible-working-in-your-later-career/retire-and-return
Posted: 25th September 2023