Pensions

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Voluntary early retirement FAQs

What is voluntary early retirement (VER)?

If you voluntarily retire before the scheme's normal pension age (60 in the 1995 section, 65 in the 2008 section, or your State Pension Age in the 2015 Career Average Revalued Earnings (CARE) scheme) this is deemed to be voluntary early retirement.

If you take voluntary early retirement, your pension will be actuarially reduced to reflect that it is being paid before your normal pension age and will therefore potentially be payable for longer.

You need to apply for your pension four months in advance of your intended retirement date and you need to take a minimum break between any further NHS employment of 24 hours in order to access your benefits. Members of the 2008 section or the 2015 CARE scheme who are partially retiring early do not need to have a break in service.  This is only a requirement for final retirement from these schemes. For more information on the required breaks, please see our retirement FAQ's.

 

When can I take voluntary early retirement?

You can take VER at any time between reaching your minimum pension age and your normal pension age.

If you are a member of the 1995 section and have a protected minimum pension age, you can take VER between  age 50 and 60. If you do not have a protected minimum pension age, you can take VER  between age 55 and 60. If you are a Mental Health Officer (MHO), you can take VER between 50 and 60, dependent on whether you have a protected minimum  pension age.

If you are a member of the 2008 section of the scheme, you can take VER between  age 55 and 65.

If you are a member of the 2015 CARE scheme you can take VER between age 55 and your State Pension Age.

 

How do I know if I have a protected minimum pension age in the 1995 section?

You will have a minimum pension age of 50 if you are in the 1995 section of the scheme and you:

  • were an active member on 5 April 2006,
  • were a deferred member on 5 April 2006, having left the scheme on or after 31 March 2000, or
  • were part of a bulk transfer into the NHS Pension Scheme on or after 6 April 2006, and qualified for a minimum pension age of 50 in the transferring scheme.

 

What is an ‘actuarial reduction’?

The term ‘actuarial reduction’ refers to the actuarial tables used to calculate the reduction to your benefits if you retire early. The Government Actuary’s Department (GAD) calculates the reduction required based on mortality rates and other data. These factors can change from time to time.

You incur this reduction when your pension is paid earlier than normal and, therefore, potentially will be in payment for longer.

If you are contributing to the 1995 section the actuarial reduction is applied separately to both your pension and lump sum. 

If you are contributing to the 2008 section or the 2015 CARE scheme the actuarial reduction is applied to your pension before commutation for the lump sum.

 

By how much will my pension and lump sum be reduced?

This depends on when exactly you retire. The actuarial reduction factors are based on your age in years and months. The closer you get to your normal pension age, the lower the actuarial reduction. An extract from the current GAD factors are shown below:

Reduction in pension, 1995 section of the scheme

Age 50 51 52 53 54 55 56 57 58 59
RF 63.9 66.5 69.2 72.2 75.4 79.0 82.7 86.7 90.9 95.4


Reduction in lump sum, 1995 section of the scheme

Age 50 51 52 53 54 55 56 57 58 59
RF 73.4 75.7 78.0 80.5 83.0 85.6 88.3 91.1 94.0 97.0


Reduction in pension and lump sum, 2008 section of the scheme

Age 55 56 57 58 59 60 61 62 63 64
RF 60.9 63.7 66.8 70.1 73.5 77.2 81.2 85.5 90.0 94.9

 

Percentage reduction in pension in the 2015 CARE scheme
There is no reduction to any commuted lump sum which is calculated after the reduction to pension.

No. of years from NPA

1

2

3

4

5

6

7

8

9

10

11

12

 Pension

 6% 11% 16% 20% 24% 27% 31%  34% 37% 40% 43% 45%

*RF = Reduction factor

View the full tables showing the monthly factors (PDF).

Please note that the factors differ between the schemes and between the nations.  You will need to contact your relevant scheme administrator for details of the factors applicable to you.

View the 2015 Care scheme table for Scotland (PDF).

 

An example of how to apply these factors is shown below:

If you retire from the 1995 section (England and Wales) at age 59, having accrued a pension of £48,000 and a lump sum of £ 144,000, the reduced benefits payable at age 59 are:

Pension:  £48,000 x 0.954  = £45,792
Lump sum:  £144,000 x 0.97  = £139,680

 

I would like to retire before my normal pension age. Can I compensate for the actuarial reduction?

If you take VER from the 1995/2008 sections your benefits will be subject to an actuarial reduction. It is not possible to pay to avoid the application of the actuarial reduction. If you are buying added years or additional pension these will also be subject to an actuarial reduction on account of non completion of the contracts.

However, if you are retiring from the 2015 CARE scheme it is possible to make a purchase for the Early Retirement Reduction Buy Out which facilitates a retirement from age 65 without the reduction, further to the purchase of between 1 and 3 years of 'ERRBO'. Read more details on this facility (PDF).

You may wish to speak to an independent financial adviser to see if you have further options available to you outside of the NHS pension scheme in order to improve your benefits.

 

How does the actuarial reduction apply if I commute part of my pension for a bigger lump sum?

The reduction factors are applied before your commutation decision is made.

Following on from the above example you are able to give up part of your annual pension to claim the maximum lump, which is £245,184.  This will reduce your pension to £36,952. 

(Information on commutation is available in our FAQ Tax Free Lump Sum).

 

Will my added years also be reduced?

 
If you are contributing to the 1995 section (or have transitioned to the 2015 CARE scheme with an ongoing contract) and your added years contract is scheduled to end at the normal pension age (60) the added years that you have accrued up to the date of retirement are subject to the same reductions that apply to the main scheme benefits.

If you are contributing to the 1995 section (or have transitioned to the 2015 CARE scheme with an ongoing contract) and your added contract is scheduled to end at age 65, the added years that you have accrued up to the date of retirement will still be subject to an actuarial reduction if you retire after 60 but before age 65.

 

Will my additional pension also be reduced?

If you are contributing to the 1995 section and retire before you have completed your additional pension contract the additional pension that you have purchased up to the date of retirement is subject to an actuarial reduction.  This would also apply if your additional pension contract was scheduled to end at age 65, and you retired after age 60 but before age 65. There are separate actuarial reduction tables for this.

If you are contributing to the 1995 section and retire early having completed your additional pension contract, the additional pension will be subject to an actuarial reduction. There are separate actuarial reduction tables for this.

If you are contributing to the 2008 section/2015 CARE scheme and retire before you have completed your additional pension contract the additional pension that you have purchased up to the date of retirement is subject to an actuarial reduction. There are separate actuarial reduction tables for this.

If you are contributing to the 2008 section/2015 CARE scheme and retire early having completed your additional pension contract, the additional pension will be subject to an actuarial reduction. There are separate actuarial reduction tables for this.

 

I am a GP; does the actuarial reduction apply to me as well?

Yes.  The rules relating to VER apply to both GPs and secondary care doctors in exactly the same way.

 

What if I am a Mental Health Officer?

Retiring before age 55 can be a particular disadvantage because the same actuarial reduction factors apply.

An example of this would be if you take VER at age 54, (one year before your normal pension age), you will receive 75.1% of your accrued benefits. This is the same as for a non-MHO 1995 section member retiring six years early.

Please refer to our FAQ on ‘mental health officers’ for further information.

 

Can I take VER and then return to NHS employment?

Yes. You will need to take a break in service.  If you are retiring from either the 1995 or 2008 section you are required to take a break of at least one day. 

If you are returning to work following retirement from the 1995 section and have taken the one day break you are also restricted to working for no more than 16 hours per week during the first calendar month of your NHS re-employment. This restriction does not apply in the 2008 section. Please refer to our FAQ on ‘returning to work after retirement’ for further information.

If you are returning to work following retirement from the 2015 scheme you are required to take a break of at least one day.

If you are taking partial retirement from the 2008 section/2015 CARE scheme there is no requirement to have a break and NHS pensionable service can continue uninterrupted.

 

Can I re-join the NHS pension scheme if I return to NHS employment after VER?

If you retire from the 1995 section you will not be able to make further contributions to the NHS pension scheme unless retirement occurred between 1 April 2008 and 30 September 2009.

If you retire from the 2008 section or 2015 scheme you are able to re-join the pension scheme.

 

Can my NHS pension be reduced if I take VER and return to NHS employment?

If you retire and return to NHS employment abatement will not apply.

Please refer to our FAQ on ‘abatement’ for further information.

 

If I take an actuarially reduced pension, are the dependant’s benefits equally affected?

No.  The dependant benefits payable will be based on your accrued pension prior to the application of the actuarial reduction.

 

Will my pension be subject to Pensions Increases if I take VER?

Pensions increases will apply, however if you have retired before age 55 from the 1995 section, the payment of the increase is delayed until your 55th birthday when you will receive the full pensions increase.

Please refer to our FAQ on ‘pensions increase’ for further information.

 

How does taking VER affect the capital value of my benefits?

The capital value of your benefits will be reduced because they are calculated with reference to the actuarially reduced pension and lump sum (where relevant).  Therefore taking VER may assist you if your NHS benefits are in excess of the standard lifetime allowance (LTA).

Please see our FAQ on ‘the lifetime allowance’ for further information.

 

How does taking VER affect the annual allowance calculation?

Although the annual allowance is usually tested with reference to accrued benefits, in the year that your take VER it will be tested against the benefits actually put into payment.  This will have the effect of restricting your pension growth during your final year.

Please see our FAQ on the ‘annual allowance’ for further information.