Introduction
As the landscape of retirement continues to evolve, you may have considered taking a more flexible approach to leaving the workforce.
Two increasingly popular options for medical and dental professionals are partial retirement and ‘retire and return’. But what do these approaches involve? And which path might be right for you?
In this guide, we outline the potential benefits and challenges, helping you to make an informed decision about your journey to retirement.
What is partial retirement?
Put simply, partial retirement offers a gradual transition from full-time work to full-time retirement.
If you're a member of the NHS Pension Scheme (NHSPS), this option allows you to start drawing 100% of your benefits while you're still working and contributing to your pension, as long as you reduce your hours or take a less senior position.
If you opt to take partial retirement before you reach your normal pension age (NPA), your benefits will be reduced as you’re being paid early. As it stands, NPA for the 1995 section is 60 and the 2008 section is 65. The 2015 section is either your state pension or age 65, whichever is later.
Please note that for some special cases within the 1995 scheme, NPA is age 55. If you're unsure which section you belong to, read our comprehensive NHS Pension Scheme guide.
Benefits of partial retirement
- Retained contract – When you take partial retirement, you will retain the same contract. For hospital doctors, this includes additional income (for example, payments like pensionable CEAs) that you would lose if you chose to retire and return.
- Maintained benefits – While partial retirement offers you access to your pension savings while you continue to work for the NHS, you can also continue to build your pension pot by contributing to the 2015 scheme.
- Gradual readjustment – A gradual reduction in working hours can help you adjust to the lifestyle changes that come with retirement, while still keeping you mentally engaged and professionally active.
Challenges of partial retirement
- Reduced pensionable work commitment – If you take partial retirement, you will need to reduce your pensionable work commitment by 10%. This might be difficult if you’re a business owner (e.g. a GP partner or dental practice owner), but if you don’t, your pension may be stopped due to abatement (the process that could restrict your pension payment if you return to work in the NHS following some types of retirement).
- Practice management – If you’re responsible for running a GP practice, medical business or dental surgery, managing operational responsibilities can be tricky when working part-time.
- Work-life balance – Balancing medicine or dentistry with increased leisure time can be difficult, especially if patient demand remains high.
If you need more guidance on the partial retirement options available to you under the NHS Pension Scheme, speak to a Specialist Financial Adviser from Wesleyan Financial Services.
What is retire and return?
Another option for those who aren’t ready to step away from work altogether is to retire and return.
Retire and return allows you to take your full NHS pension and, after a short break of at least 24 hours, return to work. You can then rejoin the NHS Pension Scheme and continue building your future pension benefits.
Like partial retirement, retire and return was previously only available to those in the 2008 and 2015 sections of the NHS Pension Scheme. However, from 1st April 2023, those in the 1995 section are also able to return to work and rejoin the 2015 scheme.
If you have benefits in either the 1995 or 2008 section but had to stop contributing due to exceeding maximum service limits, you can now re-join the 2015 scheme - an option that wasn't available before 1 October 2023.
It’s also worth noting that you can rejoin the NHS Pension Scheme even if you have a maximum membership of 45 years of service in the 1995 or 2008 section, as long as you’re under the age of 75.
Retire and return won’t affect your pension if you’re over your normal pension age (NPA). As mentioned earlier, NPA for the 1995 section is 60 (for some special cases it is age 55), the 2008 section is 65, and the 2015 section is either your state pension age or age 65, whichever is later.
Benefits of retire and return
- Flexibility – Retire and return offers a greater level of flexibility when it comes to choosing when and how much you work following your retirement.
- Financial benefits – Returning to work can provide an additional source of income, helping to supplement your retirement funds.
- New opportunities – Stepping back into the workforce after retirement can open up new career opportunities, allowing you to pursue different interests or focus on specialised areas of practice.
Challenges of retire and return
- Loss of contract – If you decide to retire and return, you won’t be able to retain your contract. This means you’ll need to rely on your employer or practice partners allowing you to return. For hospital doctors, this could also mean losing valuable additional income.
- Taxation – Depending on how much you choose to work after returning to the NHS, your additional income may move you into a higher tax bracket, leading to increased taxation.
- Availability of roles – While an uncertain job market isn’t typically something doctors and dentists need to worry about, suitable part-time and locum roles may not always be available, depending on your specialty.
Tax treatment depends on your individual circumstances and may be subject to change in the future.
Which option is right for you?
Both partial retirement and retire and return offer flexible pathways to transitioning out of full-time work, but the option you choose will ultimately depend on your financial situation, career goals and personal aspirations.
There are, however, some key differences between the two that might help you make a decision:
- Leaving NHS employment – If you choose to retire and return, you must leave NHS employment, withdraw your full pension, take a short break in service and then be re-employed on a new contract of employment. If you take partial retirement, you won’t need to take a break or change jobs, but you will need to work with your employer to adjust your hours or reshape your contract to reduce your pensionable pay.
- Retaining contracts – If you choose to retire and return, you won’t be able to retain your contract. As mentioned earlier, for hospital doctors this could mean losing valuable payments such as pensionable CEAs. If you opt for partial retirement, you will keep your original contract.
- Avoiding abatement – If you choose to take partial retirement, you’ll need to reduce your pensionable pay by 10% to avoid abatement (restriction of your pension payment when you return to work). If you decide to retire and return, you can work as many hours as you choose and your pension payments won’t be reduced or stopped.
How we can help
Taking flexible retirement is a big decision, which is why talking to someone who fully understands the intricacies of the NHS Pension Scheme, as well as complex income, can help.
Specialist Financial Advisers from Wesleyan Financial Services are on hand to help you navigate these complexities, supporting you in fully understanding your pension options and achieving your dream retirement.
Simply book a no-obligation appointment today.