NHS staff ‘likely to regret’ pension opt-out

Financial advisers Chase de Vere Medical say too many people are opting out of the NHS Pension Scheme because of a lack of understanding of the benefits they are giving up. A recent Freedom of Information request by the Health Service Journal found 245,561 NHS staff had opted out of the scheme in the last three years. According to calculations by Royal London, this represents around 16 per cent of the active membership of the scheme. It has been well publicised that a number of doctors and consultants are leaving the scheme because they are facing annual and lifetime allowance tax charges. But it is particularly concerning that many younger employees are also opting out of the scheme, often because of concerns over affordability. Younger NHS employees are often on lower salaries and so paying into the NHS Pension Scheme may seem like a big expense for a benefit which is many years away. For those earning up to £47,846 per annum, employee pension contributions can be up to 9.3 per cent, while the Government pays 14.3 per cent in England and Wales, 14.9 per cent in Scotland and 16.3 per cent in Northern Ireland. Andrea Sproates, head of Chase de Vere Medical, says: “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. “The whole package of being a member of the NHS Pension Scheme is extremely valuable, but is undervalued 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. “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.”