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Sharp rise in opt-outs from NHS pension

Published on: 3 Oct 2023

The number of people who have opted out of the NHS pension scheme trebled last year, according to its most recent set of accounts. 

The NHS Business Services Authority NHS Pension Scheme 2022-23 annual accounts, published last month, showed 64,780 people opted out with deferred pension rights in 2022-23. By comparison, just 20,868 opted out with deferred pension rights the year before, making this year’s figure a rise of 210 per cent. It is also well up on the pre-covid figure of 34,764 opt-outs in 2019.

There was also a rise in the number of re-employed pensioner members, rising to 3,916, up 125 per cent from 1,743 in 2021-22. The numbers remain very small compared to the total NHS workforce.

NHSBSA will defer pension benefits – meaning the amount built up will remain in the scheme and can be paid at retirement age – when somebody has been a scheme member for at least two years or has transferred a personal pension into the NHS pension scheme. The pension benefits will be deferred after the person has left the scheme for at least 12 months. 

Graham Crossley, NHS pensions expert at Quilter, said: “The cost of living is definitely going to be one of the major factors surrounding why there has been a big surge in the number of people opting out of the NHS pension scheme. Unfortunately, with finances stretched, some people have decided to leave the scheme in a bid to have more money in their pocket today.”

Miriam Deakin, NHS Providers director of policy and strategy, added that its previous research had suggested “more staff were opting out due to concerns over the affordability of contributions amid the ongoing cost of living crisis” and “it remains alarming that so many NHS staff feel they have to give up a core element of their overall pay package”. 

She added: “Similarly, the sharp rise in the number of NHS staff who have retired but chosen to come back to the health service could be due to a range of factors including how cost-of-living pressures are hitting people hard, as well as policy measures to encourage people to return to the service.”

HSJ has previously reported on a large wave of pension opt-outs taking place between 2015 and 2017, likely prompted by how tax legislation interacts with the NHS pension, leading to some higher-paid members receiving steep, unexpected tax bills. 

The government has since made adjustments to pension tax to mitigate this. In the latest budget, the government announced it would cut lifetime allowance entirely and increase the annual allowance by 50 per cent, although these changes took effect after the end of the 2022-23 financial year. 

The government has also changed the pension rules around retire-and-return to encourage those who have retired from the NHS to return. Again, this change took place after the end of the 2022-23 financial year.