Taking early retirement

We cover what voluntary early retirement is, if you should take your NHS pension early and how much your pension will be reduced by.

Location: UK
Audience: All doctors
Last reviewed: 18 November 2021
Piggybank illustration

What is voluntary early retirement?

This is when you voluntarily retire before your NHS pension scheme's normal pension age:

  • between ages 55 and 60 in the 1995 section

  • between ages 50 and 60 in the 1995 section if you have a protected minimum pension age (you were in the pension scheme on 5 April 2006)

  • between ages 55 and 65 in the 2008 section

  • between 55 and your state pension age in the 2015 scheme. 

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

When to apply

You need to apply for your pension four months in advance of your intended retirement date and you need to take a minimum 24-hour break between any further NHS employment in order to access your benefits.

Members of the 2008 section or the 2015 pension scheme who are partially retiring early (draw down) 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 returning to work after retirement guidance.

 

Reductions to your pension

The term ‘actuarial reduction’ refers to the actuarial tables used to calculate the reduction to your benefits if you retire early.

The GAD (Government Actuary’s Department) 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 scheme the actuarial reduction is applied to your pension before commutation for the lump sum.

This applies to both secondary care doctors and GPs.

The pension paid to your dependents will be based on your pension before actuarial reduction.

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

This depends on when exactly you retire.

The reduction is applied to the benefits you have accrued at the date of retirement and not to the potential benefits you could have achieved at your normal pension age.

The actuarial reduction factors applied are based on your age in years and months. The closer you get to your normal pension age, the lesser the actuarial reduction.

An extract from the current GAD factors are shown below. 

*RF = reduction factor

View the full tables showing the monthly factors - see pages 1,2,9 and 24.

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.

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 0.955  = £45,840

Lump sum: £144,000 x 0.977  = £140,688

Can I compensate for any actuarial reduction?

If you take early retirement from the 1995 or 2008 sections, 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.

If you are retiring from the 2015 scheme, it is possible to make a purchase for the ERRBO (early retirement reduction buy out) which facilitates a retirement from age 65 without the reduction, further to the purchase of between one and three years of ERRBO. 

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. 

What if I commute part of my pension to 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:

1995 maximum lump sum is 5.36 of the pension =

£45,840 x 5.36 = £245,702

Commuting in this way will reduce the annual pension =

£245,702 - £140,688 = £105,014 additional pension.

£105,104 / 12 = £8,751 additional pension given up.

Pension payable = £45,840 - £8,751 = £37,089.

Find more information on commutation in our lump sum guidance.

Lifetime and annual allowance

The capital value of your benefits will be reduced because they are calculated using the actuarially reduced pension and lump sum.

Therefore, taking early retirement may assist you if your NHS pension is in excess of the standard lifetime allowance.

The annual allowance is usually calculated using your accrued benefits. In the year that you take early retirement, it will be calculated against the actuarially reduced benefits actually put into payment. This will restrict your pension growth during your final year.

 

Additional pension

Will my added years be reduced?

If you are contributing to the 1995 section (or have transitioned to the 2015 scheme with an ongoing contract) and your added years contract is scheduled to end at 60 or 65, 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 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 even if you retire after 60 but before age 65.

Will my additional pension 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.

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.

If you are contributing to the 2008 section or 2015 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.

If you are contributing to the 2008 section or 2015 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 these.

Will my pension in payment be increased?

Pensions increases will apply to your benefits in payment.

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 which would have been applied in the intervening years.

Returning to work

Can I return to work after taking early retirement?

Yes. You will need to take a break in service. If you are retiring from either the 1995/2008 section or the 2015 scheme 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 or the 2015 scheme. Please refer to our guidance on returning to work after retirement

During the COVID-19 pandemic, the restriction of working no more than 16 hours during the first calendar month after a 24 hour break has been suspended but will be restored in due course.

If you are a member of the 1995 section or 2015 scheme where final salary linkage for 1995 section benefits has been lost, on account of a disqualifying break in service of 5 years or more, you can claim early retirement benefits from the 1995 section without taking a break in NHS employment.

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

Can I rejoin the pension scheme?

If you retire from the 1995 section you will not be able to make further contributions to the NHS pension scheme unless you retired 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.

An exception to this is if you transitioned to the 2015 scheme and retained a final salary link to your earlier 1995/2008 section benefits.

On accessing your 1995/2008 section benefits with a final salary link you cannot continue to contribute to the 2015 scheme. If that link has been broken as a result of a break in service of five years or more you can continue with 2015 scheme membership.

Abatement will not apply.