Save, make, understand money


One in three leave the NHS pension scheme because of rising costs

Rebecca Goodman
Written By:
Rebecca Goodman

Over 50,000 people opted out of the NHS pension scheme last year because they could not afford the payments, according to new data.

Between April and December 2022, 155,092 people left the scheme and 53,762 did so because of the cost-of-living crisis.

This equates to 35% of the scheme’s members who have opted out of the pension because of rising costs.

Of those who opted out of the pension, 26,100 did so because of affordability and 27,662 did so because of other financial priorities, according to the Freedom of Information request from Quilter to the NHS Business Services Authority.

But by opting out of the pension, members also lose any benefits associated with it.

The data comes amid a wave of public sector strikes over pay, including by many workers in the NHS such as junior doctors, nurses, and ambulance staff.

Some of the people opting out of the scheme will then opt back in again. This is a method of avoiding paying the annual allowance tax charge, known as ‘hokey cokey’. Doctors have also previously reduced their working hours to avoid paying the charge.  

Last month, it was confirmed the annual pension allowance would rise to £60,000, from £40,000.

It was also confirmed that the lifetime allowance, the maximum amount someone can save into a pension without having to pay an additional tax charge, would be abolished on 6 April. 

‘People opting out in their droves is worrying’

Graham Crossley, NHS pension specialist at Quilter, said: “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.

“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.”