NHS workers opting out of “gold-plated” pension
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- Published: Monday, 15 October 2018 07:35
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A quarter of a million NHS workers opted out of the pension scheme over the past three years, with experts blaming a “punitive” government tax regime and the current cost of living, the HSJ has revealed. Their investigation found 245,561 people opted out of the scheme between 2015 and 2017, with 102,755 opting out in 2016 alone, representing a 78% increase from the previous year.
The government reduced the amount of tax relief that can be applied to pension schemes in April 2016 and dropped the lifetime allowance to £1m. The figures suggest the government’s pension reform may well have had a significant impact on the number of opt outs in 2016.
Experts are blaming this exodus from the defined benefit pension scheme on the creep of tightening tax rules. Jon Greer, head of retirement policy at wealth manager Quilter, told the Daily Telegraph: “The impact of the lifetime allowance is beginning to rear its head, a trend likely to continue as the Treasury has made it clear that taxation on pensions is no longer for the substantially wealthy.”
Two policies have hit those with generous pensions hardest: cuts to the annual and lifetime allowances, which increasingly turn healthy retirement funds into a tax burden, the Daily Telegraph explained. In April 2016 the Government reduced to £40,000 the annual allowance individuals can put into their pension and still get tax relief. Gradually it has also decreased the lifetime allowance, the maximum you can save into a pension, to £1.03m from a peak of £1.8m in 2010. Savings exceeding that will be hit with a tax charge of up to 55% on the overflow. You are likely to be affected by the lifetime allowance in 2018/19 if you are on track for a final salary pension, with no separate lump sum, of more than £51,500 a year.
According to HSJ the group with the highest increase in opt outs were 46-55 year olds, with a 94% increase in 2016. This was followed by the 16-25 year old and 36-45 year old age groups, which saw an 86% and 83% increase in opt outs respectively.
Danny Mortimer, chief executive of NHS Employers, told HSJ that concern was mounting that NHS staff are considering leaving the pension scheme, “particularly senior clinical staff”. “Employers would like to see more flexibility in the pension scheme to allow staff to differently manage contributions to reflect and support their personal priorities,” Mr Mortimer said. “We believe that this would further modernise our offer to staff, and assist retention for the scheme and more generally for employers.”
Andy Haynes, executive medical director at Sherwood Forest Hospitals Foundation Trust, told HSJ the pension changes are resulting in staff choosing to retire, and described this as “a significant issue for people”. “Those consultants are capable of delivering a lot of work because they are so experienced,” Dr Haynes said, adding there needs to be “clear guidance” from the government and access to “quality advice” around the pension scheme.
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