NHS workers urged not to ditch lucrative pensions as number of opt outs reach 'eye-watering' levels

11 February 2019

NHS workers are leaving the NHS pension in droves, despite the scheme offering members lucrative and guaranteed benefits in retirement.

According to a Freedom Of Information (FOI) request by specialist publication the Health Service Journal, a worrying 245,561 members have left the scheme in the last three years.

Pensions firm Royal London says this represents 16% of active scheme members.

Some of the opt-outs will be from better paid doctors and consultants who are worried about breaching either the annual or lifetime allowances.

The annual allowance limits overall contributions to a maximum of £40,000 a year before tax charges are levied, while the lifetime allowance caps total benefits at £1,030,000 (in the 2018/19 tax year).

However, Chase De Vere Medical says that even if higher earners are facing tax charges, leaving the scheme isn’t always the best course of action.

The specialist adviser also expressed concern that many younger and less well-paid members are leaving the scheme because they are concerned they can’t afford contributions. For some it can seem like a sizeable reduction in salary for a benefit they are years away from enjoying.

Employee contributions for scheme members earning up to £47,846 a year can be as much as 9.3%. In England and Wales the government pays in a further 14.3%, in Scotland the government pays 14.9%, while in Northern Ireland it pays 16.3%.

Andrea Sproates, head of Chase De Vere Medical blames a lack of understanding amongst NHS workers for the high opt out rates.

“These employees are giving up benefits and guarantees which would be really expensive to replicate if they were purchased separately. This includes a pension scheme which is excellent value, with a retirement lump sum, and additional benefits such as dependents’, ill health and death in service benefits,” she says.

“The whole package of being a member of the NHS Pension Scheme is extremely valuable, but is under-valued by a lack of understanding and awareness of what members’ contributions are really paying for, how much the government adds and the benefits the scheme provides.”

As a result, the specialist adviser is calling on the NHS to provide more information to staff about the benefits of the scheme.

She adds: “It is clear from the eye-watering opt-out rates that there is a huge need for NHS employees to be provided with financial education or advice, so that they can make informed decisions about their pension scheme. At present it is likely that many members are leaving the scheme without a clear understanding of what they’re giving up, a decision they are likely to regret in the future.

“Similarly, senior doctors and consultants would also benefit from financial education or advice. Many are opting-out of the scheme because they are facing tax charges, but they may be better off staying put, even after the tax charges are taken into account, or could find ways to reduce their tax charges, for example, by taking a larger retirement lump sum.” 



In reply to by anonymous_stub (not verified)

Maybe some think a good expensive pension will adversely affect their entitlement to a free state pension if the threat of means-testing is followed through.

In reply to by anonymous_stub (not verified)

I was in Local Governement when we were offered wonderful op-outs a few years back. I opted to stay put unlike a number of colleagues. I am now on a significantly better pension than most and happy with it. I took out an additional scheme to buy an annuity. It promised a small fortune but failed to achive anything like the projections. Golden rule don't be greedy and don't believe the hype!

In reply to by anonymous_stub (not verified)

It's a vote of "No confidence" in the government.Just as many young people believe government will not be able to afford to pay a state pension by the time they reach retirement age.., whatever age that might be by then... So do many state workers have no faith in government being able to pay an unfunded public sector pension by the time they are able to claim it.

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