Some NHS staff could risk retirement poverty, warns former pensions minister

Concerns have been raised over an “epidemic” of workers opting out of the NHS pension scheme.

Workers who opt out could be giving up pensions worth around nine times what they save, Royal London warned.

It said a recent Freedom of Information (FOI) request by the Health Service Journal found nearly a quarter of a million (245,561) NHS staff had opted out of the NHS pension scheme in the past three years.

A nurse earning £25,000 annually who opted out for a year could save £1,420 by doing so.

But it would cost a lump sum of around £13,000 – around nine times the £1,420 saving – to fill the pension hole caused by that one year of lost pension in retirement, Royal London said.

When people opt out they also give up large employer contributions into their pension pot.

Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: “The NHS as an employer needs to take urgent action to tackle this epidemic of pension opt-outs.

“All public sector workers have faced a squeeze on their take-home pay in recent years, but it is in the NHS where this has translated into shockingly high numbers of people leaving the pension scheme.

“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.”

Royal London said its own FOI requests into opt-out rates from some other public service pension schemes suggest there are much lower levels of opt-out in these sectors as a proportion of active scheme members compared with the NHS scheme.

A Department of Health and Social Care spokesman said: “The NHS pension scheme is amongst the very best available, providing deservedly generous retirement benefits for hard-working NHS staff.

“Around nine in 10 nurses, midwives and health visitors actively participate in the scheme and they will be among the over one million dedicated NHS employees to benefit from the pay rise we announced earlier this year.”