Abatement is the process which restricts your NHS pension in payment if you return to work in the NHS after some types of retirement. It also applies within the first 12 months after an election for partial retirement.
Since 2008 it mainly applies to doctors with MHO (Mental Health Officer) status, ill health, interests of efficiency of the service and partial retirements.
In respect of all retirements except for partial retirement, where applicable, abatement will reduce your NHS pension pound-for-pound if your earnings on joining an employment which could be NHS pensionable, plus the enhanced element of your NHS pension, exceed your pre-retirement NHS pensionable earnings.
Prior to that, if you are a doctor with MHO status, then your full NHS pension was taken into account for abatement calculation purposes and not just an enhanced element.
Since the COVID Pandemic, abatement for MHO members was suspended until this was completely removed from 1st April 2024.
The amount that you are able to earn after retirement before abatement will apply is known as your ‘earnings margin’.
Please note that abatement only applies in relatively few instances.
In respect of partial retirement, the whole pension ceases to be payable if pensionable earnings (engagement in relation to GPs) increases above 90% within the first 12 months after the election day. The pension will become payable again when pensionable earnings (commitment in relation to GPs) reduces to below 90% of pensionable earnings/commitment. If this does not happen then the pension becomes payable again at full retirement/a second partial retirement or on reaching age 75.
Abatement criteria
Abatement might apply if you return to employments which would normally be treated as pensionable in the NHS pension scheme after certain types of retirements. This includes returning to work for a ‘direction’ employer where access to the NHS pension scheme would normally be available. Direction employers include medical schools and other university institutions.
Abatement might apply if you are under the scheme normal pension age (60 in the 1995 section, 65 in the 2008 section, or your state pension age in the 2015 scheme), and return to NHS employment following retirement on the following grounds:
- ill health
- the early payment of a deferred pension on the grounds of ill health
- in the interests of the efficiency of the service.
Abatement can also apply within the first 12 months of electing for partial retirement.
Since 1 April 2024 abatement has been abolished in relation to MHOs who return to NHS employment.
Abatement will not apply if you return to work in employment which would not normally be treated as pensionable in the NHS pension scheme.
It will also not apply if you return to work after your normal pension age (60 in the 1995 Section, 65 in the 2008 Section and state pension age in the 2015 scheme). Since 1 April 2024 it no longer applies to MHOs who return to work before age 60.
Abatement doesn’t apply if you return to pensionable NHS employment having retired on the grounds of:
• voluntary early retirement
• age (at your normal/state pension age)
• redundancy.
Abatement will not apply to any benefits claimed via partial retirement/ (in the 1995/2008 Section or 2015 scheme) unless the members pensionable pay/commitment increases within the first 12 months of receiving drawn down benefits. If this occurs during the first 12 months after draw down then the pension will remain abated until the required reduction by at least 10% of pensionable earnings/commitment before partial retirement is made.
Pensionable NHS earnings
Additional guidance on the pay detailed below can be found here.
Your pre-retirement NHS earnings are based on your actual earnings and not on your notional whole-time equivalent figures. This will be of relevance to part-time doctors.
The NHS pensions agencies will choose the highest pre-retirement pay figure from the last three years of employment, to give as much scope as possible in respect of re-employed NHS earnings.
Therefore, the pre-retirement pay figure used for abatement purposes may not be from the same year as the pay figure that was used to calculate your pension benefits.
This might be beneficial where you have reduced your hours leading up to retirement. For example, if you reduce your hours by 50% one year before your intended retirement date then the retirement pay figure for abatement purposes could be the penultimate year. However, the annual rate of pay for the purposes of calculating pension benefits could be the final year.
Your pre-retirement earnings relate to your average annual dynamised pay earned over your practitioner career. Dynamised income means it is increased in line with pension increases plus 1.5%.
Your pre-retirement NHS earnings are based on your actual earnings and not your notional whole-time equivalent earnings. This will be of relevance to part time doctors.
Your pre-retirement NHS earnings are the greater of:
- the reckonable pay used to calculate pension benefits, or
- the annual rate of pay for your previous employment at the time it ceased.
Your pre-retirement earnings relate to average annual dynamised pay earned over your practitioner career. Dynamised income means it is increased in line with pensions increases plus 1.5%.
Your pre-retirement NHS earnings are based on your actual pensionable earnings at the time employment ceased (or if better revalued earnings in the last 10 years).
Your pre-retirement earnings relate to average annual pensionable pay earned over your practitioner career.
The enhanced element of your pension is the difference between the pension you are actually receiving and the pension that you would have received if you had retired on the same day on the grounds of voluntary early retirement, and received an actuarially reduced pension.
Applying abatement to your pension
No, only the enhanced element of your pension can be abated unless you are subject to abatement after partial retirement.
Prior to the abolition of abatement for MHOs from 1st April 2024, if you were a member of the 1995 section and you had MHO status, then your entire pension could have been abated.
Abatement in relation to partial retirement only applies for a period of 12 months from the date of the partial retirement election and where it does apply the whole pension accessed on partial retirement grounds (between 20% and 100%) ceases to be payable.
In relation to all retirements except for partial retirement, abatement will continue to apply until the level of your post-retirement earnings, made up of NHS earnings and the unearned portion of your NHS pension, no longer exceeds your pre-retirement NHS earnings or until you reach the scheme normal pension age whichever comes first
If you are subject to abatement within the first 12 months of taking partial retirement your pension can become payable again if you reduce your pensionable earnings (commitment for GPs) to below 90% of what it had been in the 12 months prior to the partial retirement election. In this case the pension becomes payable from the next payment date after the reduction has been made.
The abatement rules will continue to apply to each part of the pension until you reach the normal pension age for each pension scheme.
Earnings from working as a locum GP via a locum agency or from a limited company from which you have set yourself up as will not count towards abatement.
Earnings from working for most locum agencies will not count unless they provide access to the NHS pension scheme via a ‘direct engagement model’. If you work for locum agencies, they will be able to advise if this is the case. It is recommended that you do check the position with the locum agency as soon as possible.
Any retirement lump sum payable is not subject to abatement.
Converting pension to optional lump sum will not increase your ‘earnings margin’. The assessment of the ‘earnings margin’ is calculated with reference to your pension before any commutation.
If you moved to the 2008 Section and had to commute pension to your lump sum (to provide the Mandatory Lump Sum equivalent to that which you had in the 1995 Section), as the reduction to pension was mandatory the earnings margin is calculated after this reduction is made. No further voluntary commutation is taken into account however.