Tens of thousands of teachers and doctors shun gold-plated pensions

Telegraph

4 hours ago

Tens of thousands of young teachers and doctors are shunning their gold-plated pensions because they can't afford the contributions.
Last year, more than 85,000 teachers and doctors opted out of their defined benefit index-linked pension schemes, which pay a guaranteed income in retirement.
Under the NHS scheme, staff contribute between 5.2pc and 12.5pc of their salaries while the state contributes a vast 23.7pc each year.
The Teacher Pension Scheme is even more generous, with workers paying in between 7.4pc and 12pc, and receiving a 28.7pc contribution from their employers.
By comparison, private sector workers, who are almost all enrolled in defined contribution pensions, where your pension pot is at risk of how well your investments have performed, receive a 3pc contribution from their employer.
Some 75,421 NHS workers opted out of their pension scheme in the 2023-24 financial year, according to a Freedom of Information request obtained by The Times.
This represented a 72pc increase from the 43,732 who opted out in 2020-21. In the same period, those quitting the Teacher Pension Scheme increased by 25pc from 8,020 to 10,825.
The breakdown of data showed the decision to opt out was primarily taken by workers under the age of 40.
Around 70pc of NHS staff who left the scheme in 2023-24 were born after 1984, similar to the 67.5pc of teachers who left.
Neither schemes allow staff to lower their contributions, although once they have stopped paying they have the opportunity to rejoin after a year and are automatically re-enrolled after three years.
Steve Webb, a former pensions minister and partner at LCP, said: 'If you are a young teacher or other public servant on a modest wage and saving for a house deposit, a pension that you will benefit from in nearly half a century can seem a lot less important than the desire to move out of rented accommodation or your parents' house.'
It comes as resident doctors in England — formerly known as junior doctors — are considering striking over pay conditions.
The British Medical Association is currently balloting members whether to take industrial action over dissatisfaction with the Government's above-inflation pay offer of 4pc.
Resident doctors have taken industrial action 11 times since 2022, with NHS England estimating the walkouts have led to almost 1.5 million appointments being cancelled or rescheduled.
Some campaigners have argued that public sector workers' benefits should be rebalanced, decreasing the Government's pension contributions to top up wages.
Last year, investment firm Hargreaves Lansdown calculated that employer contributions to public sector pensions – funded by the taxpayer – cost the Government around £32.2bn a year.
Around £21bn of that – equivalent to two-thirds – is spent on NHS workers and teachers.