Taking a flexi approach to retirement

Introduction

Stepping back from the workplace can feel daunting, especially when it’s the culmination of a life’s work. Or it might be that giving up work entirely simply isn’t financially practical. That’s why flexi-retirement is becoming the go-to choice for many.

This usually means continuing to work after pension savings have been accessed, whether in the same job, a new role or on reduced hours. But making any change to your retirement plans will have financial implications - so proper planning is key.

In this guide, we’ve answered your most asked questions around taking a flexi-retirement.

How can I start to slow down?

There are a number of options in place to help you change the way you work for the NHS. These initiatives include ‘stepping down’ (reducing your level of responsibility), ‘winding down’ (reducing the number of hours you work) and even the option to ‘retire and return’.

Individuals with an NHS Pension membership between 31st March 2000 and 5th April 2006 can start accessing their pension from the age of 50. Others may not be able to access any pension benefits before the age of 55. The options available to you when you do approach that minimum pension age will depend on which section of the NHS Pension scheme you belong to.

Previously, if you took benefits from the 1995 section, you couldn’t rejoin the scheme or continue to build benefits in the 2015 scheme. However this changed from April 2023.

From 1st April 2023, members of the 1995 section can now return to NHS employment after they’ve retired and start building up benefits in the 2015 scheme. You can also now take a partial retirement - taking some or all of your pension while you continue to work.

Please note that if you are an NHS Pension member in Northern Ireland, you cannot currently take partial retirement. However, this is set to change in 2024.

To find out more about the rules surrounding partial retirement, follow these links:

• England and Wales
• Scotland
• Northern Ireland (Proposed flexibilities)

I want to take a flexi-retirement, where do I start?

The first step is to decide what you want to achieve with a flexi-retirement. This could be freeing up your time to travel or to pay for a child’s education or house deposit.

Once a goal is in place, you should review your financial incomings and outgoings. For example, what your money is spent on now, what it might be spent on in the future and overall living costs. This will help you set the framework to decide what is needed financially to make that goal possible.

Both establishing goals and reviewing outgoings is something that a Specialist Financial Adviser from Wesleyan Financial Services can help with. Some will use specialist cashflow modelling tools. These look at current and future data on income, expenditure and lifestyle to show how cash requirements might rise or fall over time, helping provide a clear overview of what money is needed.

How can I use my NHS Pension to fund my retirement?

When it comes to flexi-retirement, there are a number of options in place to help you change the way you work for the NHS while starting to access some of your pension benefits - for example, reducing your level of responsibility or the number of hours you work.

Remember though, most members can't access benefits before the age of 55 (set to increase to age 57 in 2028), and the options available to you when you approach your minimum pension age will depend on which section of the NHS scheme you belong to.

To find out more about which part of the scheme you're part of and how that might impact your retirement plans, read our  NHS Pension Scheme guide. Alternatively,  speak to a Specialist Financial Adviser from Wesleyan Financial Services to discuss your options in more detail.

Are there any tax implications to consider?

Introduced in 2006, the annual allowance is designed to prevent the wealthiest people taking advantage of excessive tax relief. The allowance limit has been adjusted many times - in 2014 it dropped to £40,000, until March 2023, when the government announced it was being raised to £60,000.

This means that unless you have a ‘carry forward’ available, you can currently only save £60,000 a year into a pension before you’re potentially hit with a tax charge of up to 45% (47% in Scotland).

For high-earning doctors and dentists, this threshold may be lowered further under the ‘tapered annual allowance’.

Finally, while the Lifetime Allowance (LTA) was abolished in 2024, there will still be a limit on how much you can access as a lump sum. If the limit is exceeded, then the excess will be taxed at your highest marginal rate of income tax.

These can be complex issues with a multitude of aspects to consider. Your retirement is important - so  getting the right advice is essential.

Tax treatment is dependent on individual circumstances and is subject to change in the future.