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A quarter of a million NHS staff has decided to opt out of their pension scheme due to growing fears that they cannot afford to pay into it. This figure is five times higher than that recorded by any other public pension fund.
According to insurer Royal London, over the past three years, 16 per cent of the total membership has chosen to leave the pension. This followed a freeze on pay for several years as well as the Government reducing the amount for tax relief available to the savers. Compared with the Teachers’ Pension Scheme at 3.4 per cent, the Civil Service Scheme at 1.45 per cent and the Armed Forces Scheme at 0.04 per cent, the NHS opt-out figure is much higher.
Royal London also discovered the most common age group to opt out was in the younger NHS workers, aged between 26 and 35, with 30,000 workers in this particular age group choosing to do so in 2017 alone.
A typical nurse on £25,000 per year has to pay a 7.1 per cent contribution before tax relief. Staff are therefore saving £1,420 by opting out of their NHS pension scheme but could be missing out on a lump sum of £13,000 when they retire.
Sir Steve Webb, former pensions minister and director of policy at the mutual insurer, stated:
“Those who opt out will save money in the short term, but could lose nine times as much in the long-term in reduced pension rights. The NHS needs to find better ways to communicate the value of NHS pensions, otherwise large numbers of NHS staff risk a retirement in poverty.”
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