The Daily Telegraph - Saturday - Money
Hundreds of thousands of NHS workers miss out on £3,780
NHS staff are declining pension contributions of thousands of pounds a year because of pressure on their finances and large tax bills, new figures show.
Responding to a parliamentary question, Chris Skidmore, the health minister, said 211,485 people had opted out of the gold-plated health service pension over the past five years.
The NHS pension scheme has been under scrutiny in recent months after it emerged that senior staff were being hit with huge tax bills after pay rises pushed them over the threshold for annual pension contributions.
Most people are able to pay up to £40,000 a year into a pension but the so-called “tapered annual allowance”, introduced in 2016, means that the more someone earns the less they can put into a pension. Those who earn more than £150,000 a year begin to lose their allowance and risk being hit with punitive tax bills.
Telegraph Money has reported on perverse situations where NHS consultants are being punished for their success – including a case of a surgeon who received a pay rise after winning an award, triggering a surprise tax bill.
Experts say the issue is forcing some to consider early retirement despite the service’s Brexit staffing crisis.
But Steve Cameron of Aegon, the pension company, said those who opted out over the past five years were more likely to have been motivated by the high cost of contributions.
The impact of the annual allowance changes will be more keenly felt this year, he said, as savers had previously
been able to carry over any unused allowance to use within three years. He said he expected future figures to reveal a flood of opt-outs as this right expired.
“I suspect that some of these people will think the hit on their take-home pay is too big and opt out,” he said. “This is becoming a real scandal where individuals are passing up on a significant contribution from their employer.”
Someone who earns the average wage of £27,000 is expected to pay in 9.3pc of their salary – equivalent to £2,511 – each year, with the NHS contributing 14pc. This means those who opt out are passing up on £3,780 a year.
Boris Johnson has promised a fix for NHS workers who are unfairly penalised by the annual allowance.