ERRBO: Buying Out the Early Retirement Reduction

The problem ERRBO solves

In the 2015 CARE scheme, your normal pension age is your State Pension age, or 65 if that is later. Retire before NPA and your pension is permanently reduced.

For most doctors currently mid-career, NPA is 67. The State Pension age is rising from 66 to 67 between 6 May 2026 and 6 April 2028, with a further increase to 68 currently legislated for 2044 to 2046.

Crucially, if the State Pension age rises during your membership of the scheme, your normal pension age may rise with it. You are, in effect, holding a pension whose target date can move away from you.

ERRBO is the mechanism for pulling that date back. You or your employer pay extra contributions so you can take your 2015 Scheme benefits at an unreduced level before you reach NPA.

What you can buy

You can buy an agreement for retirement 1, 2 or 3 years before your NPA — but no earlier than age 65. For example, if your NPA is 67, you can take out an ERRBO for 2 years (retiring at 65) or 1 year (retiring at 66).

This floor at 65 is the defining constraint. ERRBO is not an early-retirement product in the way most people first assume — it will never get you out at 60. It is a tool for people whose NPA has drifted to 67 or 68 and who want it back at 65.

The fractional-NPA exception. Where your NPA is not a whole number — say 66 years and six months, which is common during the SPA transition — an agreement can be taken out to include the months. A member with an NPA of 66 years 6 months could buy 1 year 6 months and retire at 65, or buy 6 months and retire at 66. The agreement must result in a reduced retirement age that is a whole number of years.

To benefit, you must still be paying into the scheme when you retire and your State Pension age must be over 65.

What it costs

The cost depends on your age in complete years at the day before the effective date of the agreement — that is, your age at 31 March immediately before the intended start date — and the number of years' reduction you are buying.

The rate is a percentage of pensionable pay, payable each year in addition to your normal tiered contributions. Selected rates from the current factsheet table:

The full table runs from age 16 to 66. Broadly: roughly 1.67–1.73% per year of buy-out, two years is double that, three years is triple.

NHSBSA's worked example: a member with an NPA of 68 who joins the 2015 Scheme at 35 and buys a three-year agreement pays 5.01% on top of their tiered rate for 30 years, retiring at 65 with the actuarial reduction eliminated entirely.

Where the agreement includes a number of months rather than whole years, the cost is pro rata the one-year rate.

The cost is subject to review by the Scheme Actuary, and following a review the cost of future instalments on an existing agreement can change. If that happens you have the option to end the agreement — you don't lose everything, but only the pension built up during the payment period keeps the reduced retirement age.

You cannot pay by salary sacrifice. Note also that ERRBO contributions do not count towards the annual allowance limit on pension growth — a meaningful advantage over Additional Pension for anyone with a tight annual allowance position.

The age effect is smaller than you'd expect

This is the genuinely surprising part of the table: the rate is almost flat across a working lifetime. A three-year buy-out costs 5.02% at age 30 and 5.01% at age 35 — and the cheapest rates sit in the early forties (5.00%), rising again thereafter.

So the naive reasoning — "apply late, pay a slightly higher percentage for far fewer years, save money" — has real force on the arithmetic of contributions paid. Someone starting at 55 pays 5.04% for ten years; someone starting at 30 pays 5.02% for thirty-five.

But the two purchases are not the same thing. ERRBO only protects the pension you accrue while the agreement is in force. Previous scheme years are not protected and will be reduced for early payment if you claim before NPA.

The member who starts at 55 has protected ten years of accrual and left twenty-five years' worth reduced. The member who starts at 30 has protected everything. The flat percentage buys a proportionally smaller benefit the later you start, which is precisely why the rate barely moves with age — the actuarial pricing already reflects it.

The right comparison is therefore total contributions paid against the total reduction avoided on the specific slice of pension protected, not headline percentages.

The critical trap: retiring at the wrong age

This is where ERRBO does real damage to people who don't understand it.

If you retire earlier than the age agreed in your ERRBO, your pension benefits are still reduced for being paid earlier and longer — but the reduction is measured from your ERRBO retirement age rather than your NPA.

NHSBSA's example: a member with an NPA of 66 who bought a one-year agreement, then retires at 64 instead of 65. The retirement is one year earlier than the effective NPA of 65, so the pension is reduced by the "normal pension age − 1" factor.

So a doctor who buys an ERRBO to retire at 65, then leaves at 62, has paid extra contributions for years and takes an actuarial reduction anyway. The ERRBO shrinks the reduction — it's measured from 65 rather than 67 — but does not eliminate it, and the contributions are sunk. The specific reduction factors are in NHSBSA's separate early retirement factsheet, not the ERRBO one.

Conversely: if you take your pension later than the date agreed, the pension built up during the agreement period will be increased. Overshooting is not penalised.

This asymmetry matters enormously. ERRBO rewards certainty about retiring at exactly your ERRBO age or later, and punishes going early. If your honest answer to "will I definitely still be working at 65?" is "probably, but who knows" — that uncertainty has a real cost here.

Where ERRBO gives you nothing

Three situations where the contributions are simply lost:

Ill-health retirement. If you claim ill health retirement, you receive your pension early and without reduction. The ERRBO has no effect, and your additional contributions will not be returned.

Death before retirement. If you die before retirement, your ERRBO will not have any value, as any adult dependant's benefits are paid unreduced.

Redundancy — here ERRBO does have value, and it's worth being precise about the mechanism. If you're made redundant and choose to claim your pension, the cost of paying it early is assessed on the reduced retirement age taking the ERRBO into account. That means less of your redundancy payment is needed to offset the employer's cost, so any surplus returned to you is larger than it would have been without the ERRBO.

Deadlines and mechanics

The application window is tight and unforgiving.

An application must be made within 3 months of joining the 2015 Scheme (for it to be effective from your first scheme year), or within 3 months of the beginning of any subsequent scheme year (for it to be effective from that year). Application forms must be received within that window. Any later application is effective only from the beginning of the following scheme year.

Since the scheme year starts on 1 April, the practical deadline is 30 June. NHSBSA's own example: a member joining on 1 April 2022 whose application arrives by 30 June 2022 has the agreement effective from 1 April 2022, with arrears collected by the employer. An application arriving after 30 June is effective from 1 April 2023 — and the pension built up in 2022/23 is permanently outside the agreement.

Retrospective applications for earlier scheme years are not permitted.

The process:

1. Download and complete the expression of interest form (ERRBO1) from the NHSBSA member hub. This checks your eligibility and confirms the rate you would pay.
2. If you wish to proceed, complete, sign and return the application for agreement (ERRBO3) — to your employer, not to NHSBSA.
3. Your employer is then instructed to deduct the additional contributions from the effective date.

Use the Request to suspend, terminate or vary an ERRBO agreement form, also on the member hub, to stop, suspend or increase contributions.

Ongoing rules

Once an agreement is in place, it rolls forward automatically to subsequent scheme years until ended.

Breaks in service. A break of 5 years or less means the agreement automatically recommences on the same basis, subject to any Scheme Actuary cost revisions. A break of more than 5 years terminates it — but only the pension built up during the payment period keeps the reduced retirement age; the rest is unaffected.

Suspension. An agreement can be suspended on hardship grounds only, for up to one year. If contributions don't restart within that year the agreement is terminated — and you cannot take out any further agreements. NHSBSA will tell you when you must restart to avoid this. That permanent bar is the harshest provision in the whole factsheet.

Termination. You can terminate at any time. If contributions have been paid for less than one year, they are repaid and the agreement cancelled. If paid for one year or more, contributions from any part scheme year are repaid and the buy-out period is limited to the end of the previous scheme year.

You cannot reduce payments. Once in an agreement, the only options are to continue or terminate.

Increasing the agreement. You can increase contributions to secure an earlier reduced retirement age, still no lower than 65. The cost is set by your age at the 31 March immediately before the increase. Critically, the earlier retirement age applies only to pension accrued after the revised contributions start — everything before that stays on the previous election's retirement age.

If you change employment you must notify your new employer of the extra contributions you're paying, for the agreement to continue. This is a genuine administrative failure point — nobody will do it for you.

You must continue paying the ERRBO contributions until you retire or reach your NPA.

Interaction with Additional Pension

There is an overall limit on the total value of additional benefits that can be bought in the scheme through additional contributions. If you have bought or are buying Additional Pension, this may limit the ERRBO agreement available to you. NHSBSA will tell you if this applies when you apply.

McCloud remedy interaction

ERRBO is not available in the 1995/2008 Scheme. If you are affected by the public service pensions remedy and your 2015 Scheme service between 1 April 2015 and 31 March 2022 was rolled back into the legacy scheme, any ERRBO payments made during that remedy period need separate handling. NHSBSA covers the options under its contingent decisions guidance. If you were paying ERRBO during the remedy period and haven't checked this, it's worth doing.

Is it worth it?

Honest answer: for a specific and fairly narrow group.

ERRBO tends to work when:

• You are relatively young, so you're protecting most of your career's accrual
• Your NPA is 67 or 68, giving you meaningful room above the age-65 floor
• You are confident you'll work to at least your ERRBO age
• You value guaranteed, inflation-linked, longevity-insured income over flexibility
• You want the certainty of a fixed retirement date insulated from further SPA rises
• Your annual allowance is already tight — ERRBO contributions don't add to your pension input amount, unlike Additional Pension

ERRBO tends not to work when:

• You might retire before your ERRBO age — the penalties are severe and the contributions are sunk
• You already have significant private provision that could bridge 65–67 instead
• You want your money to be inheritable — ERRBO contributions have no death benefit value
• You're close to NPA already, so you're protecting only a few years' accrual
• You might need to pause contributions for reasons other than hardship — suspension is hardship-only, and a failed suspension bars you from any future agreement

The genuine alternative

The comparison most doctors should actually run is ERRBO against a SIPP or ISA sized to bridge the gap years. A bridging pot lets you retire at 62 or 63 if you want to, is inheritable, and doesn't penalise you for changing your mind — but it carries investment risk, has no longevity guarantee, and the normal minimum pension age rises from 55 to 57 on 6 April 2028, which constrains when a SIPP can be accessed.

ERRBO buys certainty; a bridging pot buys flexibility. Neither is universally correct, and the answer turns on how confident you are about your retirement date.

Practical takeaways

1. You cannot go below 65. ERRBO closes a gap; it doesn't create early retirement.
2. Only accrual during the agreement is protected. Earlier years stay reduced, and retrospective applications aren't allowed.
3. Apply by 30 June for the agreement to cover the current scheme year.
4. Retiring before your ERRBO age still means a reduction — measured from the ERRBO age — and the contributions aren't refunded.
5. No value on death before retirement or on ill-health retirement. Real value on redundancy.
6. The rate barely changes with age (about 1.67–1.73% per year bought out), but what it buys shrinks the later you start.
7. ERRBO contributions don't count towards the annual allowance — a genuine edge over Additional Pension.
8. Suspension is hardship-only. Fail to restart within a year and you're barred from ever taking out another agreement.
9. Tell any new employer when you move, or the deductions stop.
10. Model the SIPP alternative before committing to a decades-long contribution.

Sources

Rates, deadlines and scheme mechanics in this article are verified against the NHSBSA ERRBO factsheet, V12 (22 August 2024). The cost table is subject to actuarial review, so check the current factsheet for the latest figures before applying.

Other primary sources worth consulting:

• NHSBSA early retirement factsheet — for the actual reduction factors if you retire before your ERRBO age
• NHSBSA contingent decisions guidance — for McCloud remedy period ERRBO payments
• gov.uk State Pension age calculator — for your individual NPA

A note on advice

This article is general information, not personal financial advice. ERRBO is a long-term, largely irreversible commitment; consider regulated advice before entering an agreement.