The number of NHS staff opting out of the organisation’s pension scheme increased by 22 per cent in 2019/20, rising to 50,399 people, according to Quilter.

A Freedom of Information request from the firm showed that an average 44,843 NHS staff opted out of the pension scheme per year over the four years up to and including 2019/20, totalling close to 180,000 staff over the full period.

The data showed that 2019/20 had the highest number of opt outs, with the second highest being 2016/17 with 45,267, although this was still more than 5,000 short of last year’s amount.

Quilter acknowledged that there were a number of reasons why members might be opting out, including as a means of reducing pension growth for the year in order to avoid being hit by annual allowance tax charges.

It added that many who were opting out were also likely to be trying to duck the lifetime allowance, although Quilter argued that savers who stray beyond the allowance’s £1,073,100 limit could still benefit significantly by remaining in their schemes.

It also stated that opting out meant savers were exposing “themselves and their families to a greater financial risk in the event of death or ill health, as these benefits are reduced for a deferred member”.

Quilter NHS pension specialist, Graham Crossley, said: “This data adds to the argument that we need to take a very careful look at the current pension tax system for the public sector and see whether it is still fit for purpose.

“The NHS has played a huge role in helping the country keep going during the pandemic and its worrying and sad to see that in last tax year significantly more people in the health service felt that leaving the NHS pension scheme was their best option due to a complex tax system that penalises the right behaviours.

“Opting out of the scheme may not be best course of action and can have a serious impact on someone’s pension provision, as well as their family’s financial protection, so is therefore not a decision to be taking lightly and it is worth first seeking professional financial advice.”

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