16% of NHS workers, that’s nearly 250,000 members, opted out of their NHS Pension Scheme between 2015 and 2017. Many of them reportedly unaware of what they were giving up. It’s thought financial pressures and a lack of understanding of the benefits involved with a final salary scheme such as the NHS Pension Scheme, have created this so-called pension transfer influx.
Former pensions minister Sir Steve Webb even came out and said that the NHS needed to “…take urgent action to tackle this epidemic of pension opt-outs” as the risk of NHS workers facing “retirement poverty” becomes a real threat.
Members have been subject to a freeze on take home pay in recent years and it is thought this was a major factor in people opting out. However, the short-term gain of more money each month may mean some members are 9x worse off in the long term regarding their pension value. Younger members aged between 26-35 were the highest group to leave the scheme.
There’s also been a significant increase in the number of Doctors leaving the NHS pension scheme or taking early retirement. A change in rules which meant some may face additional tax charges by staying in the scheme, however, it is thought that they could miss out in valuable benefits which would be greater than these tax charges.
These benefits may include a guaranteed income for life during retirement as well as benefits for your family in the event of death. Also, many grow in line with inflation and don’t have extra running costs like many private pensions do.
It’s rarely the case that transferring from a final salary scheme is a good move, so if you were advised by a financial adviser to transfer your NHS pension, you might want to get that advice double checked as it may affect your nest egg. It may also be mis-selling and you could have a case to make a claim for compensation.
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