Whatever you do, don't opt out
Posted on 18 June 2012 by Andy Blake
Recently you may have received a pamphlet by email or through social media that suggests that a mass or even partial opt out from the NHS Pension Scheme by doctors would be an effective method by which to bring the government back to the negotiating table.
While the suggestion is undoubtedly well meant, I do not think that this is a good idea and I would strongly advise you not to do this. The only people who are likely to lose out from opting out of the NHS Pension Scheme are doctors.
Not only would it be difficult to persuade sufficient numbers of doctors to opt out (and remember there are over a million members of the NHS Pension Scheme who are not doctors), there would be nothing to stop the government changing the rules of the scheme to prevent members opting back in.
Part of the thinking behind the idea is to restrict further funding through contributions to the government. It has to be pointed out that the NHS Pension Scheme is not in surplus. Members pay their contributions and in return they accrue a benefit promise which will be met by the government regardless of whether at that particular time the contributions coming into the scheme exceed the benefits being paid out — or vice versa.
At the moment the contributions received by the NHS Pension Scheme exceed the benefits paid out, a fact notable in the context of the government wanting to raise a large amount of money, over the next three years, through increased contributions.
Our response to this is has been to point out that between 2009/10 – 2015/16 there will be £10.7bn more paid in to the scheme in contributions than is paid out in benefits.
This is not a funding surplus – a situation where assets exceed liabilities - as there is no fund. While it’s a very good pension scheme it is not a goose that lays golden eggs. No pension scheme could exist on the basis of receiving more than it paid out over the long term.
Doctors who opt out of the scheme may also put themselves and their families at risk. A doctor who applies for ill health retirement when not contributing to the NHS Pension Scheme may still be granted it but would receive no enhancement to their service.
Only the accrued, non-enhanced pension is payable. If the application were to be accepted while the member was in active service then they could potentially receive an enhancement to their pension worth two-thirds of their prospective service up to normal pension age.
Also, after one year of leaving the NHS Pension Scheme the death benefit gratuity drops from two times annual salary to three times the preserved pension, which is almost always less.
Andy Blake, BMA head of pensions