Partial retirement employment guidance

Chapters

This guidance aims to

Highlight the benefits of partial retirement in helping you meet workforce challenges.
Share employment practices to support you to use partial retirement.
Provide assurance for you when facilitating partial retirement with no reduction to working commitments.
Support you to communicate partial retirement to staff members and signpost them to helpful sources of information.
Disclaimer: This guidance is designed for employers, if you are a member looking for information about partial retirement, please visit the NHS Pensions member hub, partial retirement web page.

A strategic approach to partial retirement

There are many benefits to providing a flexible working culture for staff at all stages of their career. Partial retirement facilitates the retention of skilled and experienced staff, enabling them to stay in the workforce for longer. Our guidance is designed to support you to develop your approach to partial retirement to support staff retention, wellbeing and work-life balance while helping to meet your workforce priorities. We recommend that you update your retirement policies to include partial retirement.

The decision to work flexibly at any time in a career, requires careful consideration. It is important for late career flexibility to be considered in a similar way to someone returning from parental leave for example. With this in mind, we recommend that you consider using the flexible working request process developed in partnership by the NHS Staff Council. This process includes assurances for staff members that they are being treated fairly in their flexible working request.

Open conversations between staff and their HR team will be key to understanding an individual’s circumstances, needs and preferences, which should be balanced alongside the aims and objectives of the employer.

What is partial retirement?

Partial retirement is one of several retirement flexibilities that enable members of the NHS Pension Scheme to prepare for their retirement.

Members of the NHS Pension Scheme can take between 20-100 per cent of their pension benefits and continue to work in the NHS.
There is no need for a new contract of employment or a break in service to access partial retirement.
A member can partially retire on up to two occasions.
Members can continue to build up pension benefits in the 2015 Scheme after they have partially retired.

To be eligible for partial retirement a member must:

Have reached minimum pension age (Find out when members can take their pension on our web page).
Be an active member of the scheme.
Have a change to their terms of employment, which leads to a reduction to their pensionable pay of at least 10 per cent, for at least 12 months from their partial retirement date.
Not already have claimed partial retirement on two occasions.

Benefits of partial retirement

Partial retirement supports you to retain experienced staff who may otherwise choose to retire fully and leave the workforce entirely to access their pension benefits.
Retaining experienced staff is critical to delivering high quality patient care as experienced staff pass on their valuable skills and knowledge to others in the workforce.
Retiring flexibly can have a positive impact on work-life balance, improving staff wellbeing, reducing sickness absence and increasing productivity. This is particularly relevant for those in their later career who may need to change their work commitment to support their life, family, or financial priorities.
The ability to continue accruing pension benefits after partial retirement helps support financial wellbeing, enabling staff to build up more pension and support their retirement aspirations or bridge any gap between retirement and state pension benefits.
Promoting partial retirement and supporting staff to access it, aligns with the governments Fit for the Future: 10 Year Health Plan for England, which sets out a commitment to make the NHS a great employer fit for the modern age developing new approaches to flexible working, prioritising retention and supporting the health of their workforce and the NHS People Promise “We work flexibly” by supporting staff to balance family, friends, and interests with work.

Partial retirement process

Once a member has expressed an interest in partially retiring, you will need to agree with the staff member how they will reduce their pensionable pay to meet the 10 per cent reduction requirement. This needs to be an open conversation including line management, HR and the staff member to look at all possible options and agree a partial retirement date.

A reduction of at least 10 per cent of pensionable pay is required to access partial retirement. This reduction must remain in place for at least 12 months from the partial retirement date. The reduction to pensionable pay is calculated based on total pensionable pay over the 12 months prior to the chosen partial retirement date.

If a member has a clinical excellence award, as with any other job change, you and the award holder should discuss partial retirement plans with the advisory committee on Clinical Impact Awards secretariat as soon as possible.

It is important to make members aware that taking partial retirement has an impact on their entitlement to contractual redundancy. This depends on the member's contract of employment and the pension benefits they choose to take. You can find out more about this on our redundancy chapter in this guidance.

Deciding how much of their pension benefits they wish to take in partial retirement is an important decision for members and will depend on their personal circumstances. NHS Pensions have designed a calculator to support members to make this decision and to understand the impact of McCloud. These can be found on the NHS Pensions member hub partial retirement web page.

While no new contract is required for partial retirement, terms and conditions should be amended to reflect the new working arrangements. Members other terms will remain unchanged, including things such as annual leave entitlements for example.

An AW8 retirement form and partial retirement supplementary form are required for all partial retirements. These can be found on the NHS Pensions website on the employer forms page.

Employers and staff members are responsible for ensuring pensionable pay remains at the new level, or lower, for the 12-month period. Annual pay awards and pay increases members receive as they move through their pay band or pay scales do not count as an increase during the 12 months post-partial retirement. A member’s pension may be abated (stopped) if the member’s terms change again and this increases their pensionable pay to more than 90 per cent of their pre-partial retirement pensionable pay. Find out more about monitoring on the NHS Pensions partial retirement member factsheet.

After taking partial retirement, staff members may still do additional work that is non-pensionable. Overtime is non-pensionable for the 12 months following partial retirement and bank work is non-pensionable if the member opts out of the scheme for their bank work.

The staff members contract and working hours can return to pre-partial retirement levels 12 months after their partial retirement date. Of course, if the member and employer have agreed a longer-term change to working pattern or commitments, this can continue as planned.

Achieving the 10 per cent reduction in pensionable pay

To be eligible for partial retirement, members need to reduce their pensionable pay by at least 10 per cent for 12 months following their partial retirement date. We have seen that many partial retirees want to change to their working pattern, reducing pensionable pay as a result. In these circumstances achieving the 10 per cent reduction can feel relatively straight forward.

There are circumstances, however, in which both the employer and staff member do not wish to see a reduction in working commitment.

The two chapters below highlight key employer considerations in these different circumstances.

Reduction in pensionable pay through working commitment

For many staff members, partially retiring will align with a desire to remain an active and valued member of the NHS workforce while transitioning towards full retirement and:

reducing their working hours
changing their level of responsibility
or moving to a new role.

It may be that the change the member wants to make equates to more than the required 10 per cent reduction in pensionable pay. The 10 per cent is the minimum required, and members may reduce their pensionable pay by more than 10 per cent if they wish.

Employers can facilitate partial retirement by amending the members terms of employment to reflect the new working arrangements and complete the partial retirement process as shared above.

Options where a reduction in working commitment cannot be agreed

There are circumstances where both the member and employer agree that it is preferrable that there is no reduction to work commitment. This may be the case where the member is not ready to reduce their level of work or adjust their work/life balance. This may align with an employers need to meet workforce priorities such as maintaining workforce capacity and reducing waiting lists for example.

Retire and return

Where a member wants to take all their pension benefits, retire and return offers a very similar outcome, allowing a member to access all their pension benefits and continue to work through a new contract of employment. A minimum break of 24 hours is required for retire and return. To retain these skilled and experienced staff members, we encourage employers to re-employ staff on the same terms and conditions so there is no change to their employment status and not insist on a longer break. Where doctors on closed grades retire and return, employers may choose to offer the doctor local terms which mirror the contract they have left. This should be applied consistently across all closed contract staff who retire and return.

Reviewing the structure of remuneration

Where retire and return is not appropriate, employers may consider reviewing the structure of the member’s remuneration to reduce their level of pensionable pay, using non-pensionable payments to maintain total remuneration.

Employers must comply with the NHS Pension Scheme regulations, which define pensionable earnings as follows:

Pensionable earnings are broadly all salary, wages, fees and other regular payments.
Non-pensionable payments include bonuses, non-regular payments, payments made to cover expenses or overtime and pay awards or increases which are expressed by the Secretary of State to be non-consolidated.

Some local payments may be non-pensionable, You can find out more on the NHS Pensions web page on locally agreed payments.
Overtime payments are not pensionable for members who have taken partial retirement in the last 12 months. This includes hours worked over full time, or up to full time for those that work part time.
Read further guidance on where additional programmed activities may be considered overtime for consultants and SAS doctors, developed by DHSC.
Employers may wish to explore bank work as a way of maintaining a similar level of working commitment if a member chooses to reduce their working hours to access partial retirement and opts out of the NHS Pension Scheme for their bank work.

Redundancy and partial retirement

Partial retirement may impact a member’s entitlement to contractual redundancy. This depends on the members contract of employment and the pension benefits they are in receipt of.

We have provided guidance with regards to calculating contractual redundancy payments under agenda for change terms and conditions of service where partial retirement has been taken. We recommend you include this information in your flexible retirement policies and make members aware when they are considering partially retiring. Employers will need to be aware that other contracts of employment may differ from agenda for change.

The TCS Handbook section 16.6 states the following employment will not count as reckonable service:

employment that has been taken into account for the purposes of a previous redundancy, or loss of office payment by an NHS employer
where the employee has previously been given NHS pension benefits, any employment that has been taken into account for the purposes of those pension benefits.

Therefore, any service calculating partial retirement benefits should not be taken into account for the purposes of calculating a contractual redundancy payment and this should be discounted for the purposes of a future redundancy payment.

We have updated our NHS redundancy arrangements FAQ’s to reflect this advice (see question 28 under redundancy and retirement).

If a member of staff employed under an agenda for change contract wants to retire when they are made redundant, they can use their redundancy payment to buy out the early retirement reduction that would apply if they haven’t reached their normal pension age.
To do this, they must:
- be an active member of the NHS Pension Scheme
- have at least 2 years qualifying membership
- have 2 years continuous service in the scheme
- have reached minimum pension age.
Known as capitalised costs, an early retirement reduction is the cost to the scheme of providing the unreduced pension and lump sum.
If the redundancy payment is more than the capitalised costs, the member will receive the remainder of the redundancy payment.
If the redundancy payment is less than the capitalised costs, the member can choose to:
- reduce their benefits to cover the shortfall
- pay the shortfall from their own funds
- pay some of the shortfall from their own funds (reducing the reduction applied).
The member may also opt to keep all their redundancy payment and receive immediate payment of reduced pension benefits or receive unreduced deferred pension benefits paid later i.e. from their normal pension age.

Medical staff and very senior managers have alternative terms in relation to buying out an early reduction to their pension benefits and you should refer to their contract of employment for details.

To support staff members with their decisions around redundancy and retirement, you need to request redundancy estimates from NHS Pensions.
There is a 40 working day service level agreement in place for NHS Pensions to provide bulk estimates (more than 10 members) which you will need to factor into your redundancy process.
All the information, forms and contact details you need are included in the NHS Pensions redundancy overview web page under the heading redundancy estimates.

Communicating partial retirement

Actively promoting the benefits of partial retirement demonstrates that you value staff in the later stages of their career, reducing potential financial stress and helping them improve their work/life balance. Increasing awareness will help staff feel supported to continue to work in your organisation where they may otherwise choose to retire and leave the workforce entirely. It is essential that line managers are upskilled and supported to have flexible retirement discussions as part of staff career and development conversations.

Top tips for communicating partial retirement

Our flexible retirement poster showcases all the retirement flexibilities and can be used to increase awareness and understanding of the options available. It can be printed or used on screen savers, noticeboards, newsletters or as a guide to support conversations with staff.
Support line managers to incorporate flexible retirement culture and have flexible retirement conversations with their staff.
Pre-retirement information sessions are a great way to target information for those thinking about their retirement plans.
Ensure your retirement policies include partial retirement and other flexible retirement options.
Our ways to retire flexibly personas poster illustrates an example of each flexible retirement option and the benefits for the individual. Great for those conversations with staff or to share at information sessions.
Reward and benefits communications can include flexible retirement options as part of the organisation’s employee value proposition.
You can signpost staff to further information on the NHS Pension Scheme Member partial retirement factsheet, including access to the partial retirement calculator and guidance if they may be affected by McCloud.

Sources of information for employers:

We have a range of resources to support employers to embed a culture of flexible working and flexible retirement:

Our flexible retirement web page contains information and resources for employers on the flexible retirement options available to staff members.
Our retention hub provides resources and guidance to support the retention of our valuable workforce.
The flexible working hub shows how you can support staff by offering flexible working and flexible retirement options.

There is a range of guidance and support for employers provided by NHS Pensions that is the scheme administrator and by the Electronic Staff Record team. We recommend that employers read and retain these as operational guidance:

NHS Pensions has developed an employer factsheet detailing the local administration processes for partial retirements on the technical guidance page of their employer hub:
The Electronic Staff Record (ESR) guidance for managing partial retirement includes the steps employers take to record a partial retirement through the ESR system: ESR User notice 3364
ESR guidance for employers on how to record partial retirees on ESR, including how to pay a part-time staff member non-pensionable overtime: ESR User notice 3444

Contact us

We would like to hear from you if you are using partial retirement to positively impact your workforce priorities, or if you would like to discuss your strategic approach to partial retirement. Please email the pension team.