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NHS pension scheme: what it is, how it works and whether you can opt-out

4 mins read
by Lisa-Marie Voneshen
Last updated January 22, 2025

If you’re part of the NHS pension scheme and are considering opting out, there’s much to consider. We explore what you should know. 

Millions of eligible employees in the UK are part of a pension scheme, including those who work for the National Health Service (NHS). 

If you work for the NHS and are considering opting out, carefully exploring your decision beforehand is a good idea. 

We explore what the NHS pension is, how it works, and what to consider before opting out.  

Summary 

  • If you are part of the NHS pension scheme, it’s essential to understand how it works. 
  • You can opt out of the NHS pension, but it’s vital to consider the long-term implications. 
  • Unbiased can quickly match you with a qualified financial adviser who can help with your pensions and retirement planning.  
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What is the NHS pension, and how does it work? 

There are two NHS schemes, the 1995/2008 scheme and the 2015 scheme.  

As of 1 April 2022, the 1995/2008 NHS pension scheme is closed. If you earned anything in this scheme before April 2022, it will remain, and you can still access the benefits. Any benefits earned after this date will be in the 2015 scheme.  

The NHS pension scheme (2015) is a career average revalued earnings (CARE) scheme. You’ll earn 1/54th of your pensionable pay each year in your pension, which is subject to ‘revaluation’ each year to help it keep up with inflation.  

As this is a type of defined benefit pension, you’ll get paid a fixed amount at retirement, which is a valuable benefit.  

Can I opt out of the NHS pension? 

Yes, you can opt out of the NHS pension.  

What you can do with the money in your pension depends on how long you were a member. 

Here are some of your options: 

You can do this if you have been a member of the NHS pension scheme for at least two years. If not, you can only do this if you transferred a personal pension into the NHS pension scheme. 

  • Transfer the value of your benefits to another HMRC-registered pension arrangement 

To do this, you have to meet specific criteria.  

If you have been a scheme member for under two years, you’ll need to be under the normal pension age, joined within the last 12 months and applied for the transfer within this timeframe. 

If you’ve been a pension scheme member for over two years (and under the normal pension age), you can transfer only to another occupational pension scheme with defined benefits. 

When you transfer, the payment is determined by converting the value of your pension rights to a cash equivalent value. 

  • Get a refund of pension contributions (minus tax and national insurance deductions) 

Provided you’ve been in the pension scheme for under two years, are under the normal pension age, and have not transferred a personal pension into the scheme, you can get a refund on your contributions. 

If you’ve been a pension scheme member for at least two years, you cannot get a refund. 

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What happens if I leave the NHS pension scheme and rejoin at a later date? 

If you decide to leave the scheme and rejoin within five years – and have not had a refund or transferred the value of your benefits – your new scheme contributions will linked with your previous ones. 

On top of this, the benefits you had in the pension before leaving will be revalued for each year you were gone.  

What to consider before opting out of the NHS pension 

It’s worth thinking carefully about whether opting out of the NHS pension is right for you. 

The NHS pension is a defined benefit scheme, so it offers many advantages compared to a defined contribution scheme where you build up your pension pot over your working life. 

Your employer also contributes up to 20.6% of your pay into your pension, helping to boost your retirement fund.  

If you opt out, you’ll be giving up a pension with a set income payable for life (based on how much you earn and when you retire) and one guaranteed by the UK government. You’ll also give up a lump sum, which is usually tax-free. 

The NHS pension also offers ill health retirement benefits, which can be useful if you become too sick to work and have to retire early. Additionally, it provides death benefits, so your dependents may get a pension if you pass away. 

It’s a good idea to consult with a financial adviser before opting out of the NHS pension, as your decision will have a big impact on how much you get during retirement. 

Get expert financial advice 

If you work for the NHS, understanding your pension and the long-term benefits is crucial. 

Unbiased can quickly match you with a qualified financial adviser who can offer insightful guidance on your pension and retirement planning.  

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Author
Lisa-Marie Voneshen
Lisa-Marie Voneshen is a Senior Content Writer at Unbiased and has previously written for loveMONEY and Shares Magazine. She is an award-winning journalist with around a decade of experience writing and editing content across various areas, including personal finance and investing.