What is voluntary early retirement?
This is when you voluntarily retire, partially or fully, before your NHS pension scheme's normal pension age but after the minimum pension age:
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Accessing 1995 section benefits between ages 55 and 60
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Accessing 1995 section benefits between ages 50 and 60 if you have a protected minimum pension age (you were in the pension scheme on 5 April 2006)
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Accessing 2008 section benefits between ages 55 and 65. You will retain a protected minimum pension age of 55 for this service if you were in pensionable service on 4 November 2021.
- Accessing 2015 section benefits between 55 and your state pension age.
The minimum pension age will increase to 57 from 6 April 2028 for those without a protected pension age. Only bullet points 2 and 3 above qualify for a protected pension age (for the 2008 section you will need to have been in pensionable service on 4 November 2021).
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 on full retirement.
Members of the 1995/2008 section or the 2015 pension scheme who are partially retiring early (draw down) also 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.
In England, Wales and Scotland it has been possible to take partial retirement/draw down from the 1995 section from 1 October 2023. In Northern Ireland this has been possible from 1 April 2024. On partial retirement/draw down it is not necessary to have a break in service and benefits can be accessed whilst continuing in employment.
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 accessing benefits from the 1995 section the actuarial reduction is applied separately to both your pension and lump sum.
If you are accessing benefits from the 2008 section or the 2015 scheme the actuarial reduction is applied to your pension before commutation for the lump sum. For a 2008 section optant the mandatory lump sum is also subject to an actuarial reduction if taken prior to age 60.
The reduction applies to both secondary care doctors and GPs.
The pension paid to your dependents will be based on your pension before actuarial reduction.
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
Please note that the factors differ between the schemes and between the nations. Factors are also revised so 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 0.957 = £45,936
Lump sum: £144,000 x 0.983 = £141,552
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. ERRBO only protects those benefits covered by the ERRBO. If you apply now, from April 2024 the ERRBO will cover benefits from 1 April 2024 only and not benefits prior to this date.
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.
On accessing benefits on partial retirement/draw down benefits must be accessed sequentially and it is possible to request that only your 1995/2008 section benefits are accessed with no need to take the 2015 scheme accrual which will be subject to an actuarial reduction/greater actuarial reduction than 1995/2008 section benefits due to the later normal pension age.
The reduction factors are applied before your commutation decision is made.
Further to the abolition of the Lifetime Allowance charge it is possible to access a tax free lump sum up to the value of the Lump Sum Allowance (LSA) which is currently set at £268,275 (25% of the last LTA of £1,073,100). The lesser of 25% of the capital value of your benefits or the PCLS will be available to you tax free. Lump sums taken in excess of this value are subject to taxation at your marginal income tax rate.
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
Whilst the LTA charge was removed in the 2023 Spring Budget benefits still had to be tested against the LTA until its abolition on 6 April 2024. However, during the 2023/24 year no LTA charge was applied and any lump sum in excess of the tax free amount was charged at your marginal tax rate and not 55%.
On taking voluntary early retirement, before the abolition of the LTA, the capital value of your benefits were reduced because they were calculated using the actuarially reduced pension and lump sum.
Therefore, taking early retirement may have assisted you if your NHS pension was in excess of the standard lifetime allowance prior to 6 April 2024.
From 6 April 2024 only lump sum benefits on retirement or death can be subject to a charge if they exceed the tax free limit. Any excess amounts are subject to tax at your marginal rate.
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.
Added years/additional pension
If you 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 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.
If you started an additional pension contract whilst 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 the additional pension purchase you commenced whilst contributing to the 1995 section is completed it will still be subject to an actuarial reduction if you retire before your normal pension age of 60 (in relation to 1995 section benefits).
If you were 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 the additional pension purchase you commenced whilst contributing to the 2008 section is completed it will still be subject to an actuarial reduction if you retire before your normal pension age of 65 (in relation to 2008 section benefits).
If you are contributing to the 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.
Pensions increases will apply to your benefits in payment.
However, if you have retired voluntarily 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. From age 55 your pension is paid at a revised rate reflecting all increases from your retirement date.
Returning to work
Yes. You will need to take a break in service if you are retiring fully from either the 1995/2008 section or the 2015 scheme. A break of at least one day is needed. If accessing benefits on partial retirement/draw down no break in service is needed.
Please refer to our guidance on returning to work after retirement.
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 1995/2008 section or 2015 scheme there is no requirement to have a break and NHS pensionable service can continue uninterrupted.
Since 1 April 2023 all those in England, Wales and Scotland under age 75 are able to rejoin the NHS pension scheme (2015 scheme) following full retirement. This is also the case in Northern Ireland from 1 April 2024.
On accessing partial retirement benefits there is no break in contract and pension scheme membership continues. On partial retirement abatement applies for the 12 months following retirement. If during this period pensionable pay increases to more than 90% of the pensionable pay received in the 12 months prior to the election for partial retirement then the pension will cease to be payable until pay reduces to 90% or less of the previously pensionable amount. From 1 April 2024 any overtime undertaken by those who have undertaken partial retirement will not be pensionable for the first 12 months following the election to do so. Thereafter overtime continues to be pensionable up to full time hours.