NHS pension and early retirement

When can you retire from the NHS?

As a member of the NHS Pension Scheme, you’ll have both a Normal Pension Age and a Minimum Pension Age. The Normal Pension Age is the age at which you can take your full pension benefits with no reductions, while the Minimum Pension Age is the earliest at which you can start to draw benefits – but your pension will be reduced.

Both your Normal and Minimum Pension Ages depend on which section of the scheme you belong to:

* If you joined the 1995 section before 6th April 2006, you can usually take early retirement from the NHS at 50. If you joined the 1995 section on or after that date, your Minimum Pension Age will be 55.

Not sure which section you’re in? Find out more in our guide to the NHS Pension Scheme.

How your benefits are calculated when you retire early

As you’d expect, taking early retirement comes at a cost. If you decide to finish work before your Normal Pension Age, your pension is reduced to account for the longer period it will be paid over. If you’re entitled to a lump sum as part of your benefits package, this will be reduced too.

These are known as ‘Actuarially Reduced’ benefits. Again, the precise details of these reductions will depend on which part of the NHS scheme you belong to – and how early you’re retiring:

1995 Section

If you’re a member of the 1995 section and you choose to retire before your Normal Pension Age, both your pension and lump sum will be reduced (though you can still exchange some of your pension to increase the lump sum).

The table below gives you an idea of the benefits you’d lose, depending on when you retire. To find out how much your pension might be in real money terms (prior to any reduction), head to our guide to the NHS Pension Scheme.

Reduction rates change according to your exact age. For instance, if you are aged 50 years and 6 months, the reduction will be slightly different to that shown in this table. Full figures can be found in this NHSBSA document.

Early retirement factors for Scotland can be found in this NHSPS Scotland document.

2008 Section

If you retire early from the 2008 scheme, your pension is reduced as per the table below. As a 2008 member, you’re usually allowed to take up to 25% of the notional fund value as a lump sum – but this is calculated from your pension after any reduction for early retirement, so you won’t see any lump sum reductions in the figures below.

Bear in mind, however, that choosing to take a lump sum would further reduce your annual pension.

Reduction rates change according to your exact age. For instance, if you are aged 55 years and 6 months, the reduction will be slightly different to that shown in this table. Full figures can be found in this NHSBSA document.

Early retirement factors for Scotland can be found in this NHSPS Scotland document.

2015 Scheme

The following table gives you an idea of how much your pension would be reduced by if you retired early from the 2015 NHS Pension Scheme. Like the 2008 scheme, any lump sum you choose to take is calculated after the reduction of your pension.

The retirement ages shown in the table assume a Normal Pension Age of 65 - though in the 2015 scheme, Normal Pension Age will rise in line with the state pension age. That means in future, retiring at 65, 66 or 67 may be classed as early retirement, and these rates of reduction will likely change*.

Early retirement factors for Scotland can be found in this NHSPS Scotland document.

* Early Retirement Reduction Buy-Out (ERRBO)

Given the plans for state pension age to increase, members of the 2015 scheme have the option to pre-emptively ‘buy out’ the reduction that would ordinarily be applied to their pension if they retire ‘early’ at 65, 66 or 67.

Buying out the reduction means being able to retire before state pension age with full benefits intact.

How much an ERRBO costs depends predominantly on how old you are when you take out the agreement, and how many years (1,2 or 3) before the state pension age you are planning to retire.

You’ll pay for the buy-out over a number of years, by adding an extra percentage to your regular pension contributions. You can find more details of the ERRBO costs on the NHS Pensions Member Hub.

Is early retirement right for you?

After dedicating years of your life to looking after others, a long retirement will feel well earned. But if you’re considering early retirement from the NHS, the benefit reductions outlined above aren’t the only costs you should consider.

When you call time on your career early, you’re not just missing out on a few more years building your pension pot, but also giving yourself more years of retirement to fund. It’s therefore essential that you plan properly and assess exactly what income and expenditure your later years might bring.

Ideally, you’ll have other retirement income alongside your pension – perhaps from property, investment plans or savings. There’ll certainly be plenty to pay for, particularly if you’re planning to travel - but at the same time, some expenses (like your mortgage or your children’s education) may already have been paid for.

To get a clearer understanding of whether you can afford to retire early, speak to your Specialist Financial Adviser from Wesleyan Financial Services who can help you make the most of the benefits you’ve built up in the scheme.

Tax considerations in retirement

One of the factors you’ll need to consider as you approach retirement is the tax implications of your pension income.

When you retire from the NHS, you'll normally be able to take 25% of your pension benefits as a tax-free lump sum, but the remainder, paid to you monthly, will count as earned income. It is therefore liable for income tax if it exceeds your personal tax allowance.

Historically, many doctors and dentists at the higher end of the pay scale would have also been impacted by the Lifetime Allowance. Up until April 2023, exceeding the Lifetime Allowance (£1,073,100) would mean that you could face an extra charge on top of the usual income tax.

However, in March 2023, the government announced that from the 6th April 2023, the Lifetime Allowance would be removed. It was fully abolished from April 2024.

Although the Lifetime Allowance is abolished, there will still be a limit on the tax-free lump sum that can be taken. The limit is the lower of 25% of the capital value or £268,275. Anything above this limit will be taxed at your highest rate of income tax.

Tax treatment depends on your individual circumstances and may be subject to change in the future.

Making a gradual move to retirement

As a member of the NHS pension, early retirement doesn’t have to be absolute. There are a range of options that allow you to slow down your schedule and retire at your own pace.

You could take on less hours (known as ‘winding down’) or a less senior position (‘stepping down’) while starting to draw some of your pension benefits.

In a profession where so many genuinely love what they do, this can be a best of both worlds scenario. It allows you to address your work-life balance, without fully relinquishing your vocation just yet.

The ‘Retire and return’ initiative offers a further option, allowing members to retire (and claim pension benefits) at any point after minimum pension age, and then later return to NHS employment. Members of the 2008 and 2015 schemes can even rejoin their pension schemes on their return. Just note that 1995 members can’t.

From the 1st April 2023, members who retire or have retired from the 1995 section will be able to rejoin the 2015 scheme if they choose to remain in NHS employment.