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21 April 2023

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How will reducing my hours affect my pension?

Our experts answer a reader’s query about the impact of changing working hours on their retirement income

I am a 55-year-old practice manager with 1995 and 2015 NHS pension scheme membership. I have worked full-time for the NHS for 35 years. I intend to retire at 65, but I’m hoping to reduce my hours for the next 10 years. How will this affect my pension?

Answer from tax specialist Madeleine Dowling, and GP financial adviser Greg Hendricks, both of  Wesleyan, the specialist financial services mutual for GPs:

If you go part-time for the final 10 years of employment, it is really important to try and keep your hourly pay rate the same. This is because your pension calculation in the 1995 NHS pension scheme is based on the best of your final three years. So, if you retire in March 2033, your pension will be calculated based on your salary between March 2030/31, March 2031/32 and March 2032/33.

If practice managers in the 1995 scheme reduce their hourly rate in or before this period, it can be quite punishing on their pension.

If you do want to cut your hours, then the best way of doing this without affecting your hourly rate is to ensure you don’t lower your level of responsibility. For example, you could do a job share for a practice manager role instead of taking a less senior role.

The best of the last three years’ calculation will be converted into a full-time equivalent to calculate your pension, so if your hourly rate remains the same and you only reduce the number of hours you’re doing, then your pension should not be affected by the change.

Visit our Ask an Expert page for more Q&As, or if you have a question you’d like answered then do get in touch.