Book your place on our webinar on 14 September to learn more about the flexible retirement options for members of the NHS Pension Scheme.
This webinar supports our work commissioned by NHS England and NHS Improvement on using the NHS Pension Scheme to support workforce retention.
What is flexible retirement?
Flexible retirement allows organisations and staff to be flexible about:
- the age at which staff retire
- the length of time staff take to retire
- the nature and pattern of work in the lead up to final retirement.
What flexibilities are available?
Staff can step down to a different role, for example, to reduce the level of responsibility while remaining in NHS employment.
Staff can wind down to retirement by remaining in their current post but reduce the number of hours or days they work.
Retire and return
Members can request to retire, claim their pension benefits and then return to NHS employment. The Department of Health and Social Care has released guidance to help employers put policies in place to consider applications from staff.
Members can take part of their pension benefits and continue in NHS employment.
Late retirement enhancement
Members can retire later than their normal pension age and have their pension benefits increased.
Early retirement reduction buy out (ERRBO)
Members or employers can pay additional contributions to buy out the reduction applied to the member's pension if they retire before their normal pension age.
How can flexible retirement benefit my organisation?
- Helps staff work to continue working in the NHS for longer, by varying the nature or pattern of work in the lead-up to retirement.
- Assists succession planning by retaining valuable skills and experience which can be passed on to other staff.
- Retaining your valuable staff reduces the time and costs of recruitment and training.
- Increases the amount of bank staff available to cover high demand periods.
- Maintains continuity of high-level care for patients and service users.
- Makes the NHS a great place to work by prioritising work life balance.
Points for employers to consider
- How will you promote flexible retirement options to staff?
- How do you support staff who manage individuals or teams to have retirement planning discussions with their staff?
- How do you incorporate flexible retirement and retirement planning into appraisal discussions?
- How do you evaluate and manage requests for flexible retirement?
- Do your existing policies include retirement flexibilities?
- Does your workforce plan incorporate retirement flexibilities?
These are the range of retirement flexibilities available to staff in the NHS Pension Scheme (1995/2008 scheme and the 2015 scheme) and how you can apply these in your organisation.
The following flexible retirement options are available to your staff depending on which part of the scheme they are in:
1995 section – step down, wind down, retire and return
2008 section – step down, wind down, retire and return, draw down, late retirement enhancement
2015 scheme – step down, wind down, retire and return, draw down, late retirement enhancement, early retirement reduction buy out
Members can find out which section or scheme they are in through their Total Reward Statement or Annual Benefit Statement.
Employees can ‘step down’ to a different role, for example to reduce their level of responsibility whilst remaining in NHS employment. This supports the organisation to retain the individual’s skills and experience whilst also supporting the employee on their approach to retirement.
Some members opting to step down may be eligible to have their higher level of pensionable pay protected, which might mean that the member’s benefits are not affected.
Staff can ‘wind down’ to retirement by remaining in their current post but reducing the number of hours or days they work. As pensions for part-time staff are calculated on the whole-time equivalent salary and not the actual salary, the pension should not be reduced. However, staff will need to consider the impact this may have on the length of their membership, as this option reduces the speed at which members build up pensionable years. In the 2015 Scheme, any arrangement that reduces gross pensionable earnings will have a negative impact on the pension built up in that year.
This option may be used where the organisation wishes to retain the particular experience and skills with the team, but the individual wishes to reduce their hours as they approach retirement. This may support the member of staff to remain in work for a longer period of time before retirement.
Retire and return to NHS employment
Staff who have reached the minimum pension age can choose to retire, claim their pension benefits and then return to NHS employment.
Staff who retire from the 1995 section may return to NHS employment, but they cannot continue to contribute to the NHS Pension Scheme. However, these staff may be eligible to contribute to an alternative scheme under automatic enrolment.
Staff who retire from the 2008 section or 2015 scheme may return to NHS employment and they will be able to continue contributing to the NHS Pension Scheme.
This means that individuals can retire and claim their benefits but return to NHS employment and continue working past their retirement age.
Members can take part of their pension benefits and continue in NHS employment. Members can take between 20 per cent and 80 per cent of their pension benefits and continue to build up future membership in the scheme. Members can draw down on up to two occasions before retiring completely. However, if the benefits are paid before age 65, the benefits would be reduced as they are being paid early.
In addition, if members are over age 55 and their pay is reduced by at least 10 per cent, they can also partially retire and take some pension benefits. The member’s pensionable pay must be reduced for at least a year, or the member will cease to be eligible for the pension they have drawn down.
Draw down can support staff to continue working whilst benefitting from being able to partially draw down their pension benefits and supplement their income ahead of retirement.
Late retirement enhancement
If a member chooses to retire later than their NPA, their pension benefits will be increased by the application of late retirement factors.
The member can benefit from working longer to achieve an increase in pension benefits when they come to draw their pension.
Early retirement reduction buy out (ERRBO)
Members or employers can pay additional contributions to buy out, or reduce, the actuarial reduction that would be applied to their pension were they to retire before their NPA. After joining the 2015 scheme, there will be a three-month window to take out an agreement with a buy-out period beginning with the member’s first day of pensionable service.
Alternatively, a member will have three months after the beginning of each subsequent scheme year to take out an agreement, with the buy-out period and contributions backdated to the beginning of that scheme year.
Please note that ERRBO is different to the existing provision for early retirement in ‘the interests of efficiency for the service’.
Looking to the future
With a greater number of staff working into their later 60s, employers need to consider what steps can be taken to ensure motivation, engagement and productivity of the whole workforce. It is also important that consideration is given to the impact of an ageing workforce in business and workforce planning and consider how these flexibilities can support your organisation.