Phased Retirement in the UK: How It Works (2026)

Phased retirement is an approach that allows employees to move from full-time work to retirement gradually, rather than stopping work at a single point in time. This could be in the form of fewer working hours or responsibilities, or even a different role.

Phased retirement is usually adopted where both employer and employee want a gradual transition. Employees may wish to ease into retirement for financial or personal reasons, while employers may wish to retain skills, manage succession planning or facilitate an effective handover of responsibilities.

In this guide for employers, we share practical tips on how to implement phased retirement and consider the potential legal risks to be aware of to avoid issues such as unlawful age discrimination.

Section A: What Is Phased Retirement?

Phased retirement is an arrangement where an employee gradually reduces their working hours or responsibilities as they move towards retirement, rather than leaving work altogether at a single point in time. It is not a statutory scheme set out in legislation, but instead is usually an arrangement agreed between employer and employee and shaped by the terms of the employment contract and any relevant pension scheme.

Phased retirement differs from full retirement in that the employment relationship continues. The employee remains engaged under contract, continues to receive salary for the work performed and retains statutory employment rights. The change is in the scale or nature of the role, with no termination of employment.

In the UK, there is no automatic right to phased retirement. An employee can raise the possibility with their employer, but the employer is not required to agree unless the contract or a workplace policy provides an entitlement. As such, phased retirement is separate from the statutory right to request flexible working, which operates as a specific legal process.

Workplace pension access and State Pension entitlement operate under separate rules and timetables. However, as the normal minimum pension access age is due to rise from 55 to 57 in April 2028, and State Pension age remains subject to periodic review, many individuals are working for longer. In that context, phased retirement arrangements may become more common as a mechanism to balance continued employment with gradual pension access. For employers, this reinforces the importance of having an effective framework for later-career discussions.

Section B: How Does Phased Retirement Work in the UK?

Phased retirement in the UK operates through a combination of employment agreement and pension scheme rules. There is no single or uniform legal model, and the precise structure will depend on the individual’s role, the employer’s operational needs and the type of pension arrangement in place.

1. Employment arrangements

From an employment perspective, phased retirement usually involves a variation to contractual terms. This may include reduced working hours, reduced responsibilities, a different or less senior role, or a fixed transition period leading to full retirement. In some cases, an employee may ultimately leave employment and return on a consultancy basis. That arrangement is legally distinct from phased retirement within ongoing employment and can raise separate employment status and tax considerations.

Any agreed changes should be documented clearly. A reduction in hours typically results in a corresponding reduction in pay, unless otherwise agreed. Employers should ensure that variations are consensual and recorded in writing to avoid later disputes.

2. Pension access and scheme rules

The minimum normal pension access age in the UK is currently 55. This is due to increase to 57 from April 2028. Accessing pension benefits before this age is generally not permitted, except in limited circumstances such as serious ill health. The minimum pension access age is separate from State Pension age, which determines when an individual can claim their State Pension. Phased retirement does not automatically trigger entitlement to the State Pension.

Pension arrangements are central to many phased retirement discussions. Access to pension benefits depends on the type of scheme and its governing rules.

In defined contribution schemes, flexi-access drawdown can allow members to withdraw part of their pension pot while continuing to work, subject to the scheme’s rules. So whether partial drawdown is available will depend on the scheme’s specific provisions.

In defined benefit schemes, flexible retirement may be possible but often requires employer consent. Drawing benefits before the scheme’s normal retirement age may result in an actuarial reduction. The rules of the individual scheme will determine what options are available.

Employees considering pension drawdown as part of phased retirement should review their scheme documentation carefully and consider taking independent financial advice. Employers should avoid providing regulated financial advice unless authorised to do so.

3. Duration and control of arrangements

The duration of a phased retirement arrangement is typically determined by agreement between employer and employee. It may be set for a defined period, subject to review, or operate on an ongoing basis until full retirement.

Operational requirements, business needs and pension scheme constraints may all influence the length and structure of the arrangement. A clear written record of the agreed terms, including working hours, pay and any review points, will reduce the risk of misunderstanding as the employee moves towards full retirement.

Section C: Common Phased Retirement Arrangements

There is no prescribed or standard model for phased retirement. The structure adopted will depend on the needs of the organisation and the preferences of the employee. That said, phased retirement arrangements tend to fall into a number of recognisable patterns.

1. Reduced hours

One of the most common approaches is a move from full-time to part-time working. The employee remains in the same role but works fewer days or fewer hours each week. Pay is usually reduced on a pro rata basis. This arrangement can operate for a fixed period or continue until full retirement.

2. Reduced responsibilities or step-down roles

An employee may remain full-time but relinquish certain managerial or high-pressure responsibilities. In some cases, the individual moves into a less senior role, allowing a successor to take on leadership duties while benefiting from the experience and support of the retiring employee. This model can support succession planning and knowledge transfer.

3. Flexible working patterns

Phased retirement may involve amended start and finish times, compressed hours or other flexible arrangements agreed between the parties. While employees have a statutory right to request flexible working, phased retirement is framed around the transition to retirement and may operate alongside pension drawdown.

4. Fixed transition or handover periods

Some arrangements are structured around a defined handover period. The employee agrees to remain in post for a set number of months or years while gradually reducing involvement. This can provide continuity for clients and colleagues and allow time for training or recruitment of a replacement.

5. Continued employment alongside pension drawdown

Where scheme rules permit, an employee may reduce hours and supplement reduced earnings by accessing part of their pension. The employment relationship continues, but income is derived from a combination of salary and pension benefits. The viability of this model will depend on the type of pension scheme and the individual’s age, including the minimum pension access age of 55, rising to 57 from April 2028.

Section D: Can Employers Make Employees Retire?

For most roles in the UK, there is no default retirement age. Employees are generally free to decide when they wish to retire.

Since the abolition of the Default Retirement Age in 2011, a compulsory retirement age will usually amount to direct age discrimination unless it can be objectively justified. Under the Equality Act 2010, an employer seeking to impose a mandatory retirement age must show that it pursues a legitimate aim and that the chosen age is a proportionate means of achieving that aim.

Some roles, particularly in parts of the public sector, can be subject to statutory retirement provisions or service-specific rules. Beyond these, the evidential threshold for justifying a compulsory retirement age is high. Health and safety considerations linked to the nature of a particular role may, in limited circumstances, provide a legitimate aim, but blanket assumptions about age will not suffice.

If a retirement age cannot be justified, dismissing an employee because they have reached a particular age is likely to amount to unlawful direct age discrimination. It can also give rise to a claim for unfair dismissal, depending on the circumstances and whether the individual has the qualifying service for ordinary unfair dismissal (and whether any exception applies).

Phased retirement therefore operates against a backdrop in which retirement is typically voluntary. Employers considering any form of mandatory retirement should obtain specific legal advice before proceeding.

Section E: Age Discrimination and Legal Risk

Phased retirement discussions take place within the framework of the Equality Act 2010. Age is a protected characteristic under the legislation, and employers are required to ensure that decisions about retirement, working hours or role changes are not influenced by assumptions linked to age.

1. Lawful retirement discussions

There is no prohibition on discussing future plans, including retirement, provided those discussions are handled carefully. Employers can hold career development and workforce planning conversations with employees of all ages. The key is consistency. Questions about long-term intentions should not be directed only at older employees or framed in a way that suggests retirement is expected.

Where an employee raises the subject of retirement, the employer can explore options such as reduced hours or a phased transition. The discussion should remain voluntary and free from pressure. Clear documentation of what has been agreed will reduce the likelihood of later dispute.

2. Avoiding pressure and coercion

Pressuring an employee to retire, directly or indirectly, may amount to direct age discrimination. Repeated suggestions that it is time to step aside, linking retirement to performance without evidence or creating an environment in which an employee feels compelled to leave can expose an employer to claims.

If the conduct amounts to a fundamental breach of contract, the employee may also assert constructive dismissal. Employers should ensure that any proposals for phased retirement originate from mutual discussion rather than managerial assumption.

3. Performance management and neutrality

Employers are entitled to address performance or capability concerns, regardless of an employee’s age. However, poor performance should be managed through a fair and objective process that applies consistently across the workforce.

Assumptions that an older employee is less adaptable or less capable are likely to be discriminatory. Decisions about training, promotion or development should not be influenced by the belief that an employee is approaching retirement unless there is clear evidence of agreed plans.

Section F: Implementing Phased Retirement – Employer Framework

Although phased retirement is voluntary, a clear framework will help employers manage requests consistently and reduce legal risk.

1. Develop a written policy

A phased retirement policy can explain the organisation’s approach, outline the types of arrangements that may be considered and clarify that there is no automatic entitlement. The policy should sit alongside existing policies on flexible working and retirement and avoid implying that employees are expected to leave at a particular age.

2. Align with pension scheme rules

Before agreeing to any arrangement that involves pension access, employers should understand the relevant scheme rules. In defined benefit schemes, employer consent may be required for flexible retirement. In defined contribution schemes, partial drawdown may be available subject to scheme provisions and the normal minimum pension age rules.

Employers should avoid providing regulated financial advice unless authorised to do so. Employees can be signposted to independent financial advice where appropriate.

3. Train managers on lawful discussions

Managers are often the first point of contact for retirement conversations. Training should emphasise that discussions must be voluntary, consistent and free from age-based assumptions. Guidance on how to respond if an employee raises the subject of retirement can prevent informal comments from escalating into legal risk.

4. Document agreements clearly

Any agreed reduction in hours, change in duties or review period should be recorded in writing. The documentation should set out the revised terms, any review dates and the position regarding pension contributions and other benefits. Clear records protect both parties if circumstances change.

5. Review interaction with other workplace rights

Phased retirement arrangements often overlap with flexible working rights, performance management processes and, in some cases, disability-related adjustments. Employers should ensure that decisions are aligned with broader employment law obligations and applied consistently across the workforce.

Section G: Phased Retirement and Related Employment Rights

Phased retirement often overlaps with other statutory rights and workplace processes. Employers and employees should consider how these frameworks interact before agreeing to any change in working arrangements.

1. Flexible working requests

Employees have a statutory right to request flexible working from the first day of employment. A phased retirement proposal may in practice take the form of a flexible working request, particularly where the employee seeks reduced hours or altered working patterns.

Employers should handle statutory flexible working requests in a reasonable manner and notify the employee of their decision within two months, unless an extension is agreed. A refusal must be based on one or more of the prescribed statutory grounds. Although an appeal stage is not mandated by statute, it is recommended in line with Acas guidance.

Where a phased retirement request is made outside the statutory flexible working framework, employers should still apply a consistent and documented decision-making process to reduce the risk of discrimination claims.

2. Capability and performance management

Phased retirement should not be used as a substitute for managing performance concerns. If there are genuine capability issues, they should be addressed through a fair and objective performance management process.

At the same time, an employee’s age or proximity to retirement should not influence how performance standards are applied. Older employees are entitled to the same opportunities for improvement, training and support as any other member of staff. Decisions to reduce responsibilities or encourage retirement in response to performance concerns may give rise to age discrimination if not properly justified.

3. Disability and reasonable adjustments

Age itself is not a disability under the Equality Act 2010. However, some individuals approaching retirement may develop long-term physical or mental impairments that meet the statutory definition of disability.

Where an employee has a qualifying disability and is placed at a substantial disadvantage, the employer is required to make reasonable adjustments. In some cases, reduced hours or modified duties may form part of those adjustments. The legal duty to make reasonable adjustments is separate from any voluntary phased retirement arrangement, although the practical outcome may appear similar.

Employers should assess each situation individually and, where appropriate, seek medical evidence before making decisions about adjustments.

Summary

Phased retirement allows employees to reduce their working hours or responsibilities gradually as they move towards retirement, rather than leaving employment at a single point in time. In the UK, it is not a statutory right but a voluntary arrangement agreed between employer and employee, often shaped by pension scheme rules. For employers, phased retirement can support succession planning and knowledge transfer, provided discussions are handled consistently and without age-based assumptions.

Need Assistance?

Phased retirement arrangements can raise questions about discrimination risk, pension interaction and contractual variation. Our HR and employment law specialists advise employers on workforce planning, retirement discussions and policy development. For advice on a specific situation, contact our team.

Phased Retirement FAQs

Is phased retirement a legal right in the UK?

There is no statutory right to phased retirement. An employee can raise the possibility with their employer, but any arrangement depends on agreement and, where relevant, pension scheme rules.

Can I take my pension and continue working?

In many defined contribution schemes, partial pension drawdown may be possible while you continue working, subject to scheme rules and the minimum pension access age. Defined benefit schemes may permit flexible retirement, often with employer consent.

What is the minimum pension age for phased retirement?

The normal minimum pension age in the UK is currently 55. It is due to rise to 57 from 6 April 2028. Accessing pension benefits before that age is generally restricted, although exceptions can apply, including ill-health grounds and, for some individuals, a protected pension age under scheme rules.

Does phased retirement affect my State Pension?

Phased retirement does not automatically entitle you to receive the State Pension. State Pension payments depend on reaching State Pension age and meeting contribution requirements, which are separate from workplace pension rules.

Can an employer refuse phased retirement?

Unless there is a contractual entitlement, an employer is not required to agree to phased retirement. However, decisions should be made consistently and without age discrimination.

Can phased retirement arrangements be changed or reversed?

Whether an arrangement can be changed will depend on the terms agreed between the parties. If the arrangement involves a contractual variation, any further change will usually require mutual agreement.

How long can phased retirement last?

The duration is typically agreed between employer and employee. It may operate for a fixed transition period or continue until full retirement, subject to review and business needs.

Do employers have to create a phased retirement policy?

There is no legal requirement to have a phased retirement policy. However, a clear and consistent framework can help employers manage requests fairly and reduce the risk of discrimination claims.

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