Drawing your NHS pension while you keep working

Partial retirement is the NHS Pension Scheme’s way of letting you draw your pension and keep working in the same job. If you are 55 or over and your employer agrees, you can take between 20% and 100% of your pension benefits, in one or two payments, while you carry on building new benefits in the 2015 Scheme. The condition is that you agree a new working arrangement that cuts your pensionable pay by at least 10%.

How it works

NHS Pensions describes partial retirement as taking part or all of your pension benefits while you continue in NHS employment. The pension you draw is paid as a monthly amount. You can take it in one or two drawdown payments, and the minimum is 20% of your benefits.

From 1 October 2023 the rules widened. Members with 1995 Section benefits can take partial retirement once they reach their minimum pension age, up to 100% of those benefits. For the 2008 Section and 2015 Scheme, the most you can claim went up from 80% to 100%. The scheme also lets people who were non-pensionable because they hit the maximum service limits join the 2015 Scheme.

The 10% pay reduction

You need a new working arrangement that lets you reduce your pensionable pay by at least 10%. NHS Pensions gives examples: changing your level of responsibility, working fewer hours or moving to a new role. That is an agreement with your employer, so the starting point is HR or your manager, and it fits with the flexible working options in Section 33 of the NHS Terms and Conditions of Service Handbook, which lists flexible retirement among them. The NHS flexible working requests guide covers how a request is handled.

Your pensionable pay must then stay at the reduced level for at least 12 months. If it rises above 90% of your previous pensionable pay during that time, the pension in payment is stopped, which NHS Pensions calls abatement. In that first year you can still do extra work that does not count towards your pension. Overtime is non-pensionable for the 12 months after partial retirement. Bank work is non-pensionable only if you opt out of the scheme for your bank contract.

Retire and return

The other route is retire and return, where you retire, take your pension and come back after a break.

From 1 April 2023, members with 1995 Section benefits who have retired can return to NHS work and build new benefits in the 2015 Scheme, as 2008 Section and 2015 Scheme members already could. The old 16-hour rule has gone, so you can work as many hours as you choose, provided you have had a break of at least 24 hours from your previous job. NHS England says the rejoin route has no abatement, so your pension payments are not reduced or stopped, and you can rejoin even with 45 years of service as long as you are under 75. It also says you may not be able to return to the same role, which can affect which route you prefer.

Applying

The process is almost the same as applying to retire. You complete an AW8 Retirement Benefits Claim Form, and your employer completes a short Partial Retirement Supplementary Form. The employer sends the application to NHS Pensions. Agreement on your new working arrangement has to be in place before that happens, so leave time to talk it through.

NHS Pensions has a partial retirement calculator. It shows the lump sum and annual pension you might claim, how your benefits grow for each year you keep working, and any effect of abatement. The page also lists members who should ask for an estimate instead, including people affected by the McCloud remedy who moved to the 2015 Scheme before 1 April 2022, members of the 2008 Section, people with a break in pension membership and members working in more than one part-time role at the same time.

McCloud and tax

If the McCloud remedy applies to you, your later choice between legacy and 2015 Scheme benefits for 1 April 2015 to 31 March 2022 can affect how much it is safe to take now. NHS Pensions says that taking too much can leave you with overpayments to repay. It provides a separate tool to estimate a percentage that avoids that. See the McCloud remedy guide for background. Tax on pension income and early payment reductions are not covered here, and the NHS Pensions factsheet and a regulated financial adviser are the places to get figures for your case.

Taking benefits early

Benefits taken before normal pension age can be reduced to reflect that they are paid early, although Special Class or Mental Health Officer status can mean some members avoid reductions. NHS Pensions’ calculator takes account of this. The early retirement guide compares the different public sector schemes.

What to check

• Your age and your section of the scheme, because the starting age is not the same for every member.
• Whether you are in the group that should request an estimate rather than use the calculator.
• Whether the reduction in hours or responsibility is agreed in writing before the application goes in.
• What happens to overtime and bank shifts for the first 12 months.
• How the pension you draw interacts with tax, which a regulated financial adviser or MoneyHelper can explain.

The NHS Pension Scheme guide explains the basics of how the scheme works.