Pensions

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Abatement FAQs

Answers to common queries about abatement including when it applies, what your pre-retirement pensionable NHS earnings are and other issues.

What is abatement?
When does abatement apply?
When does abatement not apply?
What is the ’enhanced’ element of my pension? 
What are my pre-retirement pensionable NHS earnings?
Can my entire pension be abated?
Will my pension remain abated permanently?
Does abatement apply if I have partially retired under ‘draw down’?
Are my pre-retirement NHS earnings revalued?
I am a GP. When will my post retirement NHS income not be taken into account? 
I am a secondary care doctor. When will my post-retirement NHS income not be taken into account?
Will my earnings margin be affected if I commute pension to lump sum?
Can my lump sum be abated?  

 

What is abatement?

 

Abatement is the process by which your NHS pension is reduced pound-for-pound if your earnings on re-employment in the NHS, plus the enhanced element of your NHS pension, exceed your pre-retirement NHS pensionable earnings.

 

If you are a doctor with Mental Health Officer (MHO) status, your full NHS pension will be taken into account. 

 

The amount that you are able to earn after retirement before abatement will apply is known as your ‘earnings margin’.

 

Please note that abatement only applies in relatively few instances.

 

 

When does abatement apply?

 

Abatement might apply if you return to NHS employment after retirement. This includes returning to work for a ‘direction’ employer where access to the NHS pension scheme would normally be available.  Direction employers include Medical Schools and other university institutions. 

 

Abatement might apply if you are under the scheme normal pension age (60 in the 1995 section, or 65 in the 2008 section, or your State Pension Age in the 2015 CARE scheme), and return to NHS employment following retirement on the following grounds:

  • ill health,
  • the early payment of a deferred pension on the grounds of ill health, or
  • in the interests of the efficiency of the service

 In addition to the above if you have mental health officer (MHO) status and retire and then return to NHS employment before age 60, then abatement might apply.

 

 

When does abatement not apply?

 

Abatement will not apply if you return to work outside of the NHS.  This is because only post-retirement earnings from employment which would normally be treated as pensionable in the NHS pension scheme are taken into account.

 

It will also not apply if you return to NHS employment having retired on the grounds of:

  • voluntary early retirement
  • age (at normal pension age/State Pension Age)
  • redundancy

Abatement does not apply in respect of any re-employment beyond the normal pension age (1995/2008 sections) or State Pension Age (2015 CARE scheme).

 

Abatement will not apply to any benefits claimed via draw down (in the 2008 section/2015 CARE scheme). 

 

 

What is the ’enhanced’ element of my pension?

 

The enhanced element of your pension is the difference between the pension you are actually receiving and the pension that you would have received if you had retired on the same day on the grounds of voluntary early retirement, and received an actuarially reduced pension.

 

Please see our FAQ on voluntary early retirement for further information on the application of the actuarial reduction.

 

 

What are my pre-retirement pensionable NHS earnings?

 

If you are a secondary care doctor who is contributing to the 1995 section of the NHS pension scheme then pre-retirement NHS earnings are based on your actual earnings and not on your notional whole-time equivalent figures.  This will be of relevance to part-time doctors.

 

The NHS pensions agencies will choose the highest pre-retirement pay figure from the last three years of employment, to give as much scope as possible in respect of re-employed NHS earnings. Therefore the pre-retirement pay figure used for abatement purposes may not be from the same year as the pay figure that was used to calculate your pension benefits. 

 

This might be beneficial where you have reduced your hours leading up to retirement. For example, if you reduce your hours by 50% one year before your intended retirement date then the retirement pay figure for abatement purposes could be the penultimate year, however the annual rate of pay for the purposes of calculating pension benefits could be the final year. 

 

If you are a GP in the 1995 section your pre-retirement earnings relate to your average annual dynamised pay. 

 

If you are a secondary care doctor who is contributing to the 2008 section of the NHS pension scheme then pre-retirement NHS earnings are based on your actual earnings and not your notional whole-time equivalent earnings.  This will be of relevance to part time doctors.

 

Your pre-retirement NHS earnings are the greater of:

  • the reckonable pay used to calculate pension benefits, or
  • the annual rate of pay for your previous employment at the time it ceased

If you are a GP in the 2008 section, your pre-retirement earnings relate to average annual dynamised pay. 

 

If you are a secondary care doctor who is contributing to the 2015 CARE scheme then pre-retirement NHS earnings are based on your actual pensionable earnings at the time employment ceased (or if better revalued earnings in the last 10 years).

 

If you are a GP in the 2015 CARE scheme your pre-retirement earnings relate to average annual pensionable pay.

 

 

Can my entire pension be abated?

 

If you are a member of the 1995 section and you have MHO status, then your entire pension can be abated.

 

If you do not have MHO status then only the enhanced element of your pension can be abated.

 

  

Will my pension remain abated permanently?

 

Abatement will continue to apply until the level of your post-retirement earnings, made up of NHS earnings and the unearned portion of your NHS pension, no longer exceeds your pre-retirement NHS earnings or until you reach the scheme normal pension age/State Pension Age.

 

If you are a doctor with MHO status then abatement will continue to apply until the level of your post- retirement earnings (comprising your NHS earnings and NHS pension), no longer exceeds your pre-retirement NHS earnings, or until you reach age 60.

 

 

Does abatement apply if I have partially retired under draw down?

 

Abatement does not apply in this situation.

 

 

I have transitioned to the 2015 CARE scheme and have retained a final salary link. When does abatement cease?

 

The abatement rules will continue to apply to each part of the pension until you reach the normal pension age relevant to each part. That means until age 60 for the 1995 section benefits, age 65 for 2008 section benefits and State Pension Age for 2015 CARE scheme benefits.

 

 

Are my pre-retirement NHS earnings revalued?

Pre-retirement earnings will be increased up to current value in line with the Pensions (Increase) Act (1971).

 

Please see our FAQ on pensions increase which explains how inflationary increases are applied.

 

 

I am a GP. Which post retirement NHS earnings do not count towards abatement?

 

Earnings from working as a GP locum via a locum agency or from a limited company from which you have set yourself up as will not count.

 

 

I am a secondary care doctor. Which post-retirement NHS earnings do not count towards abatement?

 

Earnings from working on a self-employed basis will not count. Earnings from working for most locum agencies will not count unless they provide access to the NHSPS via a ‘direct engagement model’. If you work for a locum agency they would be able to advise if access to the NHSPS is via a ‘direct engagement model’ and it is recommended that you check the position with the locum agency at the time.

 

 

Will my ‘earnings margin’ be affected if I commute pension to lump sum?

 

Converting pension to optional lump sum will not increase your ‘earnings margin’.  The assessment of the ‘earnings margin’ is calculated with reference to your pension before any commutation. 

 

 

I moved to the 2008 section via the Choice exercise. Is the Mandatory Lump Sum commutation taken into account?

 

 

As the reduction to pension was mandatory the earnings margin is calculated after this reduction is made. No further voluntary commutation is taken into account however.

 

 

Can my lump sum be abated?

 

The lump sum is not subject to abatement.