50,000+ NHS workers exit Pension Scheme: consequences & options amid cost-of-living crisis

In the last tax year, over 50,000 NHS workers have opted out of the NHS Pension Scheme due to the increasing financial strain caused by the ongoing cost of living crisis. While we empathise with the challenges faced by these dedicated professionals, it is important to recognise what they may be giving up by leaving the pension scheme. In this article, we outline some key aspects of the NHS Pension Scheme and urge anyone considering opting out to make an informed decision with all facts available. If you’re thinking about leaving the scheme, consider seeking professional financial advice from Chase de Vere Dental.

#1 – The importance of additional retirement income

Without proper provision for retirement, many may struggle financially to ever stop working. Although 35 years of work will likely qualify you for the State pension, its annual amount of around £10,600 may not be sufficient.

#2 – Employer contributions add significant value

The NHS Pension Scheme includes substantial contributions from employers, legally mandated, which can result in higher future income than a private pension.

#3 – Guaranteed lifetime income

The NHS Pension provides a government-backed, guaranteed income for life upon reaching retirement age, ensuring a secure retirement regardless of longevity.

#4 – Inflation-proof retirement income

The NHS Pension Scheme adjusts retirement income according to inflation, maintaining your purchasing power in most years.

#5 – No investment risk in building your pension ‘pot’

NHS Pension rules determine your retirement income, eliminating concerns about stock market performance or economic fluctuations.

#6 – Dependent benefits

In addition to a guaranteed income for life, your legal spouse, registered civil partner, qualifying scheme partner and dependent children, may receive a reduced income after your death, providing them with added financial security.

#7 – Lump sum death benefits

Beyond dependent income, your dependents may also receive a tax-free lump sum payment from your NHS Pension upon your death.

#8 – Benefits in the event of ill Health

In the event of permanent ill health an unreduced guaranteed inflation proofed income is provided for life which is enhanced for more serious illness.

#9 – Building additional NHS Pension

Through paying for Additional Pension you can increase your retirement income by up to £6,500 per annum.

#10 – Assessing tax implications with net position

Higher taxes due to the annual allowance are considerations however, this may still result in a better overall financial position, especially with recent government announcements on pension tax rules.

#11 – Personal pensions lack the same security

Private pensions lack the guaranteed income and investment risk protection provided by the NHS Pension Scheme.

Before opting out of the NHS pension, seek advice from a professional financial adviser experienced in handling similar situations. This complex decision requires a thorough understanding of your unique circumstances to avoid giving up valuable benefits.

Chase de Vere offers a complimentary initial consultation with a specialist financial adviser who can listen to your situation, provide an outline of key considerations, and guide you in the right direction.

The Financial Conduct Authority do not regulate tax planning.

Content correct at time of writing and is intended for general information only and should not be construed as advice.

  • Share