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Government confirms changes to NHS pension to allow more retirement flexibility

by Eliza Parr
9 March 2023

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The Government will change the NHS Pension Scheme to make it easier for GPs to partially retire, as well as remove the 16-hour-a-week rule for returning doctors.

Changes will also grant access to the NHS Pension Scheme for PCN staff, since these organisations do not qualify as organisations in the same way as NHS trusts or single GP practices. 

Following ‘broadly supportive’ responses to a recent eight-week consultation, the Department of Health and Social Care (DHSC) confirmed that the proposed changes will go ahead, with some starting from April this year. 

The changes include: 

  • Introducing pensionable re-employment meaning members can return to work and build further pension benefit
  • Allowing partial retirement 
  • Removing limits on hours recently retired staff can work on return 
  • Allowing staff working in PCNs to access the scheme
  • Changing the revaluation rate for accrued benefits to ensure the £40,000 annual allowance operates as intended and high inflation does not create larger tax charges for senior clinicians on pension earned this year.

From October this year, members will be able to partially retire, meaning they can claim up to 100% of their benefits (under the 1995 pension regulations) while continuing to work and accrue further pension (under the 2015 regulations). 

For GPs, this means that on reaching minimum pension age, which is currently 55, they will become eligible but a 10% reduction in commitment is required. 

DHSC’s consultation document laying out the proposals said: ‘For those impacted by pension tax, this proposal would also allow them to manage their tax position by partially retiring and remaining in work, rather than opting out of the NHS Pension Scheme or leaving the NHS completely.’

The BMA criticised the outcome of the consultation, saying that while changes offering more flexibility for retirement are ‘helpful’, overall the changes ‘do nothing for the majority of the workforce that is impacted by pension taxation’, according to pensions committee chair, Dr Vishal Sharma. 

He said: ‘The partial retirement option and greater flexibility for recently retired doctors returning to the workforce have potential benefits and in particular will standardise retire and return arrangements – something the BMA has lobbied for. 

‘However, the decision to delay this solution to October 2023 means it will simply be too late to prevent thousand of doctors retiring before the end of the tax year. 

‘For those who do take partial retirement, the requirement to take a 10% pay cut will lead doctors to reduce their hours at a time when the NHS needs to maximise its capacity to clear huge waiting lists.’

From April, DHSC will also completely remove the 16-hour rule, which meant members who take their pension benefits can only return to work for a maximum of 16 hours per week in their first month back. 

The proposals also sought to better cater to the changing primary care landscape by ensuring the PCN staff have permanent access to the pension scheme. 

Since PCNs are arranged differently to other NHS organisations, the scheme had difficulty ascertaining whether PCN staff are working directly under a qualifying contract.

As such, DHSC has developed eight scenarios for PCNs which ‘capture the most common ways in which PCNs can be organised to comply with the scheme administration’, and permanent access will be granted for those PCNs which meet one of the scenarios. 

Alec Collie, head of medical at the Wesleyan Group, the specialist financial services mutual for doctors, said: ‘These measures will make it easier for more experienced professionals to return to the NHS without impacting their pension benefits as severely. They also go some way to help reduce the risk that rapid rises in inflation result in significant numbers of annual allowance breaches.’

However, he added that the response has not addressed ‘fundamental problems’ caused by the lifetime allowance and annual allowance limits.

‘The upcoming budget will be an opportunity for the Chancellor to show how serious he is about tackling our NHS pension tax crisis by increasing the limits on both of these.’

DHSC’s consultation ran from 5 December 2022 to 30 Jan 2023 and received 3,386 responses from individuals and organisations including the BMA and the Association of Independent Specialist Medical Accountants (AISMA).

A version of this story was first published on our sister title Pulse.