Hordes of NHS workers are dumping their gold-plated pensions even though they could face an impoverished retirement.
Nearly 250,000 staff have dropped out of the generous scheme during the past three years.
Pension provider Royal London has voiced concerns because leaving the scheme can mean giving up pensions that are worth up to nine times more than the value of savings and offer other benefits unavailable from personal pensions.
The financial firm has worked out that a nurse earning £25,000 a year who has opted out of the NHS scheme for just 12 months could save £1,420.
Replacing that £1,420 would take a lump sum of £13,000 – more than nine times as much as the £1,420 of lost savings.
Former pensions minister Sir Steve Webb, now director of policy at Royal London, said: “The NHS as an employer needs to take urgent action to tackle this epidemic of pension opt-outs.
“All public sector workers have faced a squeeze on their take-home pay in recent years, but it is in the NHS where this has translated into shockingly high numbers of people leaving the pension scheme.
“Those who opt out will save money in the short term, but could lose nine times as much in the long-term in reduced pension rights.
“The NHS needs to find better ways to communicate the value of NHS pensions, otherwise large numbers of NHS staff risk a retirement in poverty.”
Changing government policy has impacted pension savings for many NHS top earners, such as doctors and senior administrators.
Generous retirement benefits
The annual cap on contributions of £40,000 coupled with a lifetime pension savings limit of £1.03 million means many face more tax on their earnings because they cannot claim relief on their savings.
Another reason NHS staff transfer out of the scheme is to access their savings from 55 years old, as the NHS only allows those aged 60 or over to draw pension cash.
A Department of Health and Social Care spokesman said: “The NHS pension scheme is amongst the very best available, providing deservedly generous retirement benefits for hard-working NHS staff.
“Around nine in 10 nurses, midwives and health visitors actively participate in the scheme and they will be among the over one million dedicated NHS employees to benefit from the pay rise we announced earlier this year.”