A former pensions minister has suggested that shortening the length of time for which opt-outs from auto-enrolment remain effective could keep more health workers in the NHS pension, it has been reported.
Figures published in The Times following a Freedom of Infomation request showed that more than 75,000 workers pulled out of the NHS pension scheme in the last financial year, including 25,000 under 30 years old. This was a 67% increase over the past four years.
More than a tenth of people with less than £20,000 in pensionable pay opted out of the NHS scheme, which is one of the most generous in the UK and has an employer contribution of 20.68% of earnings.
NHS pension opt-outs
Auto-enrolment into savings boosts financial wellbeing
The increase in opt-outs suggested that NHS workers were struggling to pay into their pensions amid the rising cost of living. Employee contributions are on a sliding scale from 5.1% for people with pensionable earnings under £13,246 to 13.5% for those earning more than £75,633.
To stem the rising number of opt-outs, former pensions minister and life peer Baroness Altmann proposed that the government could consider shortening the length of time for which an employee’s decision to opt out of auto-enrolment remains effective.
Currently, an employer must re-enrol an employee that has opted out of their workplace pension scheme every three years, unless the employee chooses to opt-out again.
Altmann told 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.”
Tom McPhail, director of public affairs at financial services consultancy The Lang Cat, told the paper that employers could offer a “compromise” for employees struggling to meet their pension contributions.
He 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 all together.”
The Department of Health and Social Care said the NHS pension scheme “is one of the most generous in the UK” and encourages participation by providing discounted contribution rates to lower earners.
Last year the government changed NHS pension rules that were preventing experienced clinicians from returning from retirement to help reduce waiting lists. The British Medical Association had argued that under previous arrangements a senior doctor working a 3.5-day week could receive an annual pension of £65,000, whereas working a five-day week would result in a pension of just £55,000.
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