Your circumstances are changing, so you need to consider if the current contract will still apply, or if the job is changing significantly and thus a new contract is needed. If your employee won't agree to the new contract, then you can terminate them and get someone else - the job has changed. You would need to give relevant notice (as agreed in contract) and redundancy pay may apply, as the job itself is no longer existing.
The new contract could be for term time only (depending on your term lengths, that could mean 36 weeks per year) plus holiday entitlement. You could then negotiate with your employee to split payment for this over 12 months. You need not give a retainer, though adding one may help keep your employee happy, but then can affect them getting other work during holiday periods.
You will risk losing your current employee if you make ANY changes to existing contract. It is a risk, which you will have to decide if you are prepared to take. If your nanny won't accept the new deal, then you are looking for a replacement nanny, the nanny is looking for a new job, and the children may like or dislike the new nanny.
Talk with your nanny regarding possible changes in circumstances... see if you can get an indication regarding if the contract was changed, if they would leave.