We’ve put together the following information to help branches to understand the upcoming changes to pension regulations around flexible retirement.
This article explores the options available to NHS Pension Scheme members.
UNISON branches should ask their employer/s to discuss flexible working policies and seek to negotiate fair and equitable processes for applications.
Members who retire must 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 legacy sections(1995 section and 2008 section ).
New flexibilities coming in from 1 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 take on a lower paid role and use their built-up pension to supplement their income.
Members 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 now 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.
This option allows someone with pension scheme benefits in one of the legacy schemes to retire, bring their pension into payment, 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 to work.
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 member’s NPA visit 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 members can do this and how reduced their benefits will be is dependent on their specific circumstances. The NHS BSA website is the best place to find more information on Actuarial Reduction.
Secondly, members must break their employment and return on a new contract. This requires the co-operation and agreement of the employer. 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 can offer, members could return to their old post, maybe on reduced hours, or a new post. Some employers may only offer a bank contract (this is a zero-hours 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, also, do not guarantee work, so members should be advised to check terms carefully when considering this option.
Branches can actively support members before retiring and returning, by encouraging them to speak to their line manager and HR to see what terms they will offer.
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.
The reduction in earnings will require the co-operation and agreement of the employer. This could be done by moving to a lower paid role, reducing hours or in another way.
NHS Staff Council guidance is now available to help employers manage fair, consistent and objective approaches to requests for flexible retirement.
UNISON has argued that these should be handled under the same flexible working provisions already agreed by the NHS Staff Council.
We are pleased to announce the new guidance which is available here.
Branches should raise flexible retirement process through joint partnership forums with employers to seek an agreed approach to how line managers can support applications for people who need to reduce their earnings by 10% to partially retire and drawdown their pension.
These recent changes are about retaining staff and should be applied in a way that maintains fairness and equality amongst staff.
Branches should also work with their employer to ensure anyone retiring or changing contract is notified about the impact on their union membership. One branch agreed the following wording to be shared in a letter to retiring staff…why not use it with your employer?
“Please note, if you have a union membership deduction taken from your salary, upon your termination these deductions will end along with your old assignment number. You will need to contact the Union and complete the necessary forms to reinstate your Union membership/subscription for your new assignment.”
Here are some questions we have had from UNISON branches. If you have any questions about flexible retirement policy, please email us at firstname.lastname@example.org.
Members with queries about the NHS Pension Scheme can contact email@example.com. Where members have a dispute about their pension, they should contact their rep or branch. Where necessary, the branch can access regional support. Specialist guidance can be accessed from the Pensions Unit through a regional referral on CaseWeb.
What resources are there to help members decide?
The NHS BSA are the scheme administrators, and their website is 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.
Members can access free financial advice on pension choices from Lighthouse Financial services as part of UNISON’s member benefits.
For partial retirement (drawdown), how will reducing earnings by 10% affect part-time workers who have already reduced their hours?
Branches should talk to employers 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 if this is not pensionable.
Employers may offer bank contracts 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.”
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
Pensions Unit Briefing
NHS Business Services Authority
Partial retirement – Member factsheet https://www.nhsbsa.nhs.uk/member-hub/your-options-flexible-retirement/partial-retirement
NHS BSA YouTube channel
Understanding partial retirement – Video explainer
NHS Pensions Retire and return – guide for employers https://www.nhsbsa.nhs.uk/sites/default/files/2023-03/NHSPensions_Employer_RetireandReturnGuide_%28V3%29_20230330.pdf
Getting a pension estimate
Using flexible retirement to support retention
Retire and return
Scotland Pension Scheme
Introduction of new options for flexible retirement and changes to NHS Pension Scheme (Scotland)