QuilterApr 24 2023

Over a third opt out of NHS pension scheme

Search supported by
Over a third opt out of NHS pension scheme
(2017 Bloomberg Finance LP)

The cost-of-living crisis has forced more than 50,000 people to leave the NHS pension scheme this tax year due to affordability,  new data from Quilter has found.

A Freedom of Information request from Quilter to the NHS business services authority showed that from April to December 2022, 155,092 people left the pension scheme.

Of this, around 35 per cent of the opt outs were due to cost pressures, equating to 53,762. 

However, Quilter said data only runs from April to December 2022, so this number is likely to grow.

Of those who left the scheme, 26,100 stated they left the scheme due to affordability and 27,662 stated that they temporarily opted out due to other financial priorities.

Graham Crossley, NHS pension specialist at Quilter, said: “Almost everyone has been feeling the pinch over the last year or so with inflation reaching eye watering levels and many people’s mortgage bills putting a sizeable dent in salaries. 

“This data illustrates that sadly people have decided to leave the NHS pension scheme in a bid to have more money in their pocket today.

“Although there are still significant problems with the scheme, it is very generous and people opting out in their droves is worrying to see as it can have a significant impact on someone’s future retirement prospects.”

Many of those who have opted out will also be opting back in again, according to Quilter, referred to as ‘hokey cokey’. 

This is a mechanism often used to try and reduce pension growth for the year to avoid being hit by the annual allowance tax charges.

The annual allowance charge has been in the spotlight for a number of years after it was revealed doctors were reducing their hours due to these complex rules impacting their retirement savings.

When members opt out, they expose themselves and their families to a greater financial risk in the event of death or ill health, as these benefits are reduced for a deferred member.

Crossley said: “There also continue to be some technical problems associated with how the scheme is taxed which throw fuel on the fire and make it much more likely that someone will leave the scheme to avoid a tax bill.

“Opting out of the scheme for any reason may not be the best course of action and can have a serious impact on someone’s pension provision, as well as their family’s financial protection, so is therefore not a decision to be taken lightly and it is worth first seeking professional financial advice.”


What do you think about the issues raised by this story? Email us on ftadviser.newsdesk@ft.com to let us know