NHS Pension

Should I Opt Out of the NHS Pension Scheme?

By PensionCalc Team | | Updated: 18 December 2025

Use our pension calculator to estimate your retirement income.

Let’s cut straight to it: opting out of the NHS pension is almost certainly a bad idea for most people. But you’re here because you want to understand why, not just be told what to do. Fair enough.

Maybe you’ve heard colleagues talking about it. Maybe your take-home pay feels tight and those pension contributions look tempting. Or perhaps you’re worried about the Lifetime Allowance (though that’s been scrapped as of April 2024 - more on that later).

Whatever brought you here, let’s walk through this properly.

Use our NHS Pension Calculator to see what your pension could be worth at retirement.

Pension planning

The headline: What opting out actually costs you

Here’s the thing most people miss - when you contribute to the NHS pension, your employer puts in far more than you do. We’re talking 20.68% of your salary from them, versus your contribution of between 5.1% and 14.5%.

Let’s make that real. Say you earn £35,000 a year:

  • Your contribution: Around £2,800-£3,200 per year (depending on your tier)
  • NHS contribution: £7,238 per year
  • Total going into your pension: Over £10,000 annually

If you opt out, that £7,238 from your employer? It vanishes. It doesn’t go into your bank account, a private pension, or anywhere else useful. It simply stops existing as far as you’re concerned.

”But I could invest the money myself…”

This is the argument we hear most often. And look, we get it - you might fancy yourself a decent investor, or you’ve read about people making fortunes in the stock market.

Here’s the reality check:

With the NHS pension, you get:

  • A guaranteed income for life, no matter what the stock market does
  • Your employer’s massive 20.68% contribution on top
  • Tax relief on everything you put in
  • Built-in protection against inflation
  • Zero investment decisions to worry about

With a private pension, you get:

  • Whatever you can save (minus the employer contribution you’ve lost)
  • Returns that depend entirely on market performance
  • The stress of choosing investments
  • The risk of your pot running out if you live longer than expected
  • Fees that eat into your returns

To match what the NHS pension gives you, you’d need to consistently beat the market while also making up for that missing employer contribution. That’s a tall order even for professional fund managers.

Let’s talk numbers: A real example

Meet Sarah. She’s a Band 6 nurse earning £37,000, aged 35, planning to retire at 67.

If Sarah stays in the NHS pension:

  • She contributes roughly £3,400/year
  • NHS adds another £7,650/year
  • After 32 years, she’s looking at a pension of around £21,900 per year for life
  • Plus she can take a tax-free lump sum of up to £94,000

If Sarah opts out and invests her contributions privately:

  • She saves £3,400/year (same as before)
  • NHS contribution: £0
  • Assuming 5% annual growth after fees, she’d have a pot of roughly £240,000
  • Using the 4% withdrawal rule, that’s about £9,600 per year - and it could run out

That’s less than half the guaranteed income, with all the investment risk sitting on her shoulders.

The death benefits you’d lose

Nobody likes thinking about this, but it matters - especially if you have a family.

If you die while working for the NHS, your family gets:

  • A lump sum of twice your annual salary - so £74,000 in Sarah’s case
  • A pension for your spouse for the rest of their life
  • Children’s pensions until they’re adults (or longer if in education)

Opt out, and your family gets nothing from the pension scheme. You’d need to buy substantial life insurance to come close to matching this protection.

Family protection

“What if I leave the NHS?”

Good news: your pension doesn’t disappear if you change jobs. It sits there, growing with inflation, until you reach retirement age. You can even take it early (from 55) if you’re willing to accept a reduced amount.

Some people opt out because they think they’ll leave the NHS “eventually.” But even a few years in the pension scheme is valuable. Every year of contributions buys you a slice of retirement income that’s guaranteed for life.

When opting out might make sense

We said “almost certainly” a bad idea. There are a few edge cases:

  1. You’re very close to retirement with other substantial pension savings - though even then, the employer contribution is hard to beat

  2. You have serious short-term debt problems - but talk to a debt advisor first, as there may be better options

  3. You’re already getting the State Pension and only doing a few NHS hours - the maths can be different for very part-time workers over State Pension age

  4. You genuinely can’t afford the contributions - though remember, even the lowest tier is only 5.1%, and the value you get back is enormous

For everyone else? Stay in.

What about the Lifetime Allowance?

This used to be the main reason some higher earners considered opting out. The Lifetime Allowance (LTA) was a cap on how much you could save in pensions before facing extra tax.

As of April 2024, the LTA has been abolished. You can now build up as much pension as you like without worrying about this particular tax charge.

If you opted out specifically because of LTA concerns, it might be worth rejoining the scheme. You may need to speak to NHS Pensions about how to do this.

The bottom line

The NHS pension isn’t perfect - nothing is. The contributions can feel steep when money’s tight, and the scheme’s complexity can be frustrating.

But here’s what it comes down to: where else can you put in £1 and get back £2-3 in matching contributions? Where else do you get a guaranteed income for life, death benefits for your family, and protection against inflation all rolled into one?

For the vast majority of NHS staff, the pension scheme is the single best financial benefit of the job. Opting out means walking away from tens of thousands of pounds over your career.

Decision time

What to do next

  1. Check your pension statement - NHS Pensions sends these annually, or you can access them via the Total Reward Statement portal
  2. Use our NHS Pension Calculator to estimate what you’re building up
  3. If you’re still unsure, talk to a financial adviser - specifically one who understands public sector pensions (look for someone with AF7 or similar qualifications)

And if you’ve already opted out? You can usually rejoin. Contact NHS Pensions to find out how.

Need more information?