Reader’s Question: Is it worth remaining in the NHS Pension Scheme?

4 min Read Published: 01 Jul 2011

Get an answer to your financial question onlineReader Question:

I have worked in the NHS as a nurse for 30yrs and have prison officers status. My question is two-fold. Can I stop paying into the NHS pension after 30yrs?

And do I benefit from paying after 30yrs?

Thanks in advance

My response:

Here is a link to the official NHS Pension booklet which gives all the information members require who are thinking of leaving the NHS Pension Scheme.

But to answer your first question 'can you stop paying into the NHS pension scheme?' - the answer is yes you can. You simply have to notify the scheme administrator of your intention.

As for whether you will benefit from continuing to pay into the scheme you have to first understand how final salary pension schemes work.

Under a final salary pension scheme the annual pension you receive in retirement is usually equal to

  • years of scheme membership x an accrual rate (which is a fraction such as 1/80) x your pensionable salary

The important point is that your pension is based on your period of scheme membership and not years of employment/service. For most people they are one and the same but if you chose to leave the scheme then clearly your period of scheme membership is capped.

Also the pensionable salary used in the calculation is usually based on the pensionable salary definition applied at the date you left the scheme or retired. The definition of pensionable salary varies from scheme to scheme but is usually something like the average of your last three years earnings, when a member of the scheme.

If you leave a scheme and carry on working for the same employer for many years afterwards then you are classed as a deferred scheme member. So the pension you receive at retirement will not include the years of service after you left the scheme and it will be based on your salary at the time you left the scheme. Which will likely be a lot less then the salary you will be on when you chose to retire.

Yes the deferred pension is increased in line with inflation but this is unlikely to offset the lost benefits. Also bear in mind that your pension has a death benefit which will also be affected if you decide to leave the scheme.

So in answer to your question can you still benefit from paying after 30 years? Well yes as you accrue more years of scheme membership (assuming you haven't hit the maximum allowed) and your pensionable salary will likely be based on that just before you retire (or eventually leave employment). But whether you think this additional benefit is worth the contributions you pay is a personal decision – although public sector pensions on the whole are fairly generous.

But before you decide anything discuss your situation with NHS Pensions (on 0845 421 4000) and seek financial advice.

I hope that helps

Best wishes

Damien

The material in any email, the Money to the Masses website, associated pages / channels / accounts and any other correspondence are for general information only and do not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. See full Terms & Conditionsand Privacy Policy.

Image: renjith krishnan / FreeDigitalPhotos.net

Looking for a financial adviser near you?

Do you need financial advice? An independent financial adviser can show you how to make the most
of your money. Find your nearest qualified and regulated adviser using this VouchedFor search tool.

Alternatively, Hargreaves Lansdown, one of the UK’s largest firms providing restricted financial advice, is offering a £200 John Lewis voucher* to new clients.