The current economic crisis is affecting us all and we’re feeling the pinch. So it’s not surprising to hear that in recent months many more NHS staff have chosen to leave the NHS Pension Scheme, in a bid to stave off the negative effects of high inflation on their dwindling incomes.
Unfortunately, doing so could impact on their ability to fund their retirement.
Members are having to choose between continuing to pay in vs. opting out along with the possible side-effects on their pension and their retirement that could have, including:
- Reduced pension;
- Increased tax paid on their wages, compared to active members who receive tax-relief;
- The possibility of not being eligible for an ill-health pension if the need arises;
- Death in service payouts not being applicable to dependants of those who chose to opt out.
The unions are doing all they can to fight for their staff to achieve a better deal. The right pay deal may result in more staff having the necessary funds in place for a happy retirement.
What do we think?
The NHS Pension Scheme is not likely to be the only pension scheme seeing this rate of opt out. Although pension contributions do attract tax relief, it is a deduction from pay which some people just do not feel able to manage at the moment. Opting out of the scheme can seem like the easy option in increasing income but it is possibly deferring a problem for further down the line. There are other things which could be considered such as reviewing income vs. expenditure, learning and reviewing budget options, consolidating any debts and so on.
It is important that employers support their employees in this area to retain them within the workplace (and the pension!), relieve stress and improve employee wellbeing. How do you support your employees in this area?