A quarter of a million NHS workers have opted out of the NHS pension scheme in the past three years, according to Freedom of Information data gathered by the Health Service Journal and Royal London.

Royal London says the opt out rate is far higher than other public sector schemes and could have dire consequences for the workers. The long term squeeze on public sector pay and higher contribution rates could be to blame, it believes.

Royal London says that a typical nurse earning £25,000 a year would save £1,420 by opting out but would lose pension rights worth around £13,000 when they do due to giving up the employer contribution into their pension.

Royal London says the NHS needs to take action to tackle the “epidemic” of opting out, otherwise large numbers of NHS staff risk poverty in retirement.

A recent Freedom of Information (FOI) request by the Health Service Journal found that 245,561 NHS staff had opted out of the NHS pension scheme in the last three years. 

That accounts for about 16% of the active membership of the scheme, Royal London calculates. 

Additional FOIs tabled by Royal London to the Teachers’ Pension Scheme, the Civil Service Pension Scheme and the Armed Forces Pension Scheme found much lower levels of opt-out (see chart). 

The opt-out figures are 3.4% for the Teachers’ scheme, 1.45% for the Civil Service Scheme and 0.04% for the Armed Forces Scheme.

Royal London says it believes some of the opt outs in the NHS scheme are due to senior consultants and GPs leaving because they have reached tax relief limits for high earners. However the evidence is that NHS workers aged 26-35 were the most common age group to opt out, with 30,000 workers in this age band choosing to do so in 2017 alone.

A squeeze on public sector pay and increased pension contribution rates may have encouraged more workers to opt out to save money and keep more income, Royal London believes.

Steve Webb, 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.”