Posted on 27 October 2023

​According to reports, a former minister of pensions has suggested that reducing the amount of time that opt-outs from auto-enrolment remain effective could keep more healthcare workers in the National Health Service pension. More than 75,000 employees left the NHS pension plan in the most recent fiscal year, including 25,000 younger than 30, according to data released in The Times after a Freedom of Information request. With an employer contribution of 20.68% of earnings, the NHS scheme is one of the most generous in the UK. However, more than a tenth of those with less than £20,000 in pensionable pay chose not to participate.

When you join the NHS, you will be enrolled in the NHS Pension Scheme automatically as soon as you begin working. You have the option to opt out of the program as it is voluntary. Your pension contribution rate, which ranges from 5% to 14.5% at the moment, is determined by your income. Based on your full-time equivalent pensionable pay, your rate is calculated. A new NHS pension scheme went into effect on April 1, 2015. The 2011 negotiations and battles between the government and the NHS trade unions are reflected in the new pension plan.

From 1 April 2015 members of the 1995 or 2008 sections of the NHS pension scheme without ‘full’ or ‘tapered protection’ moved to the new 2015 pension.

Some of the main features of the new scheme are:

  • is a type of defined benefit scheme which provides pension benefits based on a fixed formula.

  • It is a Career Average Revalued Earnings (CARE) scheme, rather than a final salary scheme where benefits are built up on the value of your pensionable earnings each year during your NHS career.

  • The pension build up rate is 1/54th of pensionable earnings in each year with no limit on the amount of pensionable membership which can be built up.

  • This 1/54th fraction is better than the current 1995 and 2008 Sections.

  • Each year’s pension earned will increase every year in value by the Consumer Price Index (CPI) plus 1.5 % per year.

There is a genuine conflict between paying off debt and maintaining current living expenses and saving for retirement. One ponders why the NHS won’t allow a "flex pension," where you can invest any portion of your pay instead of having to adhere to strict threshold percentages that many people clearly cannot afford. This could feasibly be a means of enabling people to continue contributing to their pensions, albeit at a lower rate for a while, until a higher contribution is feasible.

Baroness Altmann said in The Times: “You could re-enrol anyone who has opted out more frequently, perhaps every year or every two years, so they’re not out for long, and then they have to make another conscious decision, by which time maybe their salary is better or their circumstances are better.” There are others, though, suggesting similar plans. Tom McPhail, director of public affairs at financial services consultancy The Lang Cat said: “The employer could go for a compromise scheme where employees only pay in 1 or 2% and employers put in 8%, and it becomes a money purchase pension. In theory that might be a better compromise than that employee opting out altogether”.

In an effort to shorten waiting lists, the government modified the NHS pension regulations last year, which previously prevented seasoned physicians from coming out of retirement. The British Medical Association had contended that, in the past, a senior physician working 3.5 days a week could earn an annual pension of £65,000, while a physician working five days a week could only receive £55,000. With the increase in people late on rent, borrowing money and going into their overdraft, a drastic rethink is needed so people can pay for what they need now, rather than ensuring they have enough money for retirement in their pension age. Other organisations have similar archaic structures, and it would seem a better time than any before to propose a sliding scale pension, which can have contributions and matched contributions from the employer changed once a year or more as people’s circumstances change.

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