Opting out of the NHS Pension – what’s to lose?

We often meet doctors who are considering opting out of the NHS Pension, mainly because they are reaching their Lifetime Allowance and Annual Allowance limits.  The attractions for them are avoiding Lifetime Allowance and Annual Allowance charges and a higher disposable income.

However, opting out of the NHS Pension is not just about stopping your pension contributions and gaining a higher disposable income. Doctors should look at the overall picture when making the decision, including the loss of valuable associated benefits provided by the scheme.

Benefits that will be lost or greatly diminished on opting out include:

  • Ill health retirement pension
  • Life cover comprising of a lump sum paid on death plus an income for life for a surviving spouse
  • Added years contract

These benefits can be replaced to some extent by taking out private insurance contracts, e.g. life insurance, family income benefit and income protection.  Doctors would have to consider the cost of these as part of their decision.

The tables below compare the benefits provided to active members and deferred members – those who have left the NHS or opted out of their pension. 

Ill health retirement pension

Ill health retirement can be taken at any age.  Tier 1 benefits are payable if you are unable to do your current job due to permanent ill health.  Tier 2 benefits are payable if you are unable to do the same hours of work in any job due to permanent ill health.


Active Member

Deferred Member

Tier 1

Pension accrued to date paid without early retirement reduction

Pension accrued to date paid without early retirement reduction

Tier 2

1995/2008 Scheme: Tier 1 benefits plus an enhancement of 2/3 of your prospective membership to normal pension age

 2015 Scheme: Tier 1 benefits plus an enhancement of 1/2 of your prospective membership to normal pension age.

Deferred members are not eligible for tier 2 ill health benefit


Life cover

The benefits shown below would be paid out on death before retirement and under normal pension age.  Your pensionable earnings/reckonable pay are confirmed on your Total Reward Statement.  Your deferred pension would be the amount of pension accrued to date on leaving the Scheme.  Your accrued pension is also confirmed on your Total Reward Statement.


Active Member

Deferred Member

Lump Sum Death Benefits

1995 Scheme: 2 x pensionable earnings

 2008 Scheme: 2 x reckonable pay

 2015 Scheme: 2 x pensionable earnings

1995 Scheme: 3 x deferred pension

 2008 Scheme: 2.25 x deferred pension

 2015 Scheme: 2.025 x deferred pension

Survivor's Pension

1995 Scheme:

50% of tier 2 ill health pension*

 2008 Scheme:

37.5% of tier 2 ill health pension*

 2015 Scheme:

33.75% of tier 2 ill health pension*


*See ill health benefits above

1995 Scheme:

50% of the deferred pension

 2008 Scheme:

37.5% of the deferred pension

2015 Scheme:

33.75% of the deferred pension




Added years

If you opt out of the scheme for 365 days or more, your added years contract will be cancelled and you will not be able to restart it.

Deciding to opt out of your NHS Pension is a major financial decision. It is important to seek independent financial advice when considering opting out.  Please note this article does not constitute personalised financial advice.  If you require advice please contact Richard Higgs CFP FPFS on richard.higgs@wealthwestmedical.co.uk or 0117 966 5699. 

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