NHS pension abatement rules

When abatement applies, what your pre-retirement pensionable NHS earnings are and other issues.
Location: UK
Audience: All doctors
Updated: Tuesday 5 November 2019
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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 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 abatement applies

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, 65 in the 2008 section, or your state pension age in the 2015 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
  • in the interests of the efficiency of the service.

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

 

When abatement does not apply

Abatement doesn't apply in the following cases:

  • if you return to work outside of the NHS
  • if you retire early voluntarily
  • if you retire because you have reached your pension age
  • if you retire after redundancy
  • in respect of any re-employment beyond your pension age
  • on benefits claimed via draw down
  • on earnings from working as a GP locum via a locum agency or from a limited company from which you have set yourself after retirement
  • on earnings from working as a self-employed secondary care doctor after retirement
  • on earnings from working for a locum agency (unless they a ’direct engagement model’ - you should check with them) after retirement
  • to your 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.

 

How long abatement lasts

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
  • until you reach your pension age.

 

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 guidance on voluntary early retirement for further information on the application of the actuarial reduction.

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.