How to Opt Out of the NHS Pension

How to Opt Out of the NHS Pension Scheme

The NHS Pension Scheme is widely regarded as one of the most generous public sector pensions in the UK. However, some employees may choose to opt out — often due to short-term financial pressures, tax considerations, or personal retirement planning strategies.

If you're thinking about leaving the NHS Pension Scheme, it’s important to understand how to do it, what happens to your existing benefits, and what you might be giving up.

Can you opt out of the NHS Pension Scheme?

Yes. As an NHS employee, you are automatically enrolled into the NHS Pension Scheme, but participation is not compulsory. You can opt out at any time by completing and submitting the relevant form to your employer.

However, before proceeding, it’s vital to understand the financial implications, as opting out means losing both employer pension contributions and tax relief on your own.

How to opt out: Step-by-step

Step 1: Download the opt-out form

To opt out of the scheme, you must complete Form SD502, available from the NHS Business Services Authority (NHSBSA) website:

• Visit: www.nhsbsa.nhs.uk

• Search for “SD502 opt-out form”

• Download the latest version

Step 2: Complete the form

You’ll need to provide:

• Your full name and contact details

• Your National Insurance number

• Your employer’s name and payroll number

• The date from which you want to opt out

Make sure all sections are filled in accurately. Incomplete forms may delay processing.

Step 3: Submit the form to your employer

Once completed, give the form to your employer’s payroll or HR department, not to NHS Pensions directly. Your employer will remove you from the scheme and stop future contributions.

If you’re a new starter and submit the form within the first opt-out window (normally one month), any pension contributions already deducted from your pay may be refunded.

What happens after you opt out?

• You’ll stop building up new pension benefits from the date you leave the scheme

• Your employer will stop contributing to your pension on your behalf

• Your existing benefits are preserved (deferred) and will continue to be revalued with inflation until you claim them

• You may be automatically re-enrolled every three years, in line with pension legislation — but you can opt out again if you wish

Things to consider before opting out

1. You’re giving up valuable employer contributions

Your NHS employer currently contributes around 20.6% of your salary into your pension. If you opt out, you’re missing out on what is essentially free money toward your future retirement.

2. You’ll lose pension tax relief

As a member, your contributions are made before tax is deducted — meaning the government effectively adds 20% (or more if you’re a higher-rate taxpayer). Opting out removes this benefit.

3. You’ll lose added protections

While in the scheme, you’re covered by:

• Death in service benefits (usually a lump sum of twice your salary)

• Ill-health retirement pensions if you become permanently unfit to work

• Survivor benefits for your spouse, civil partner, or dependants

Opting out may mean losing some or all of these protections.

4. There may be alternative options

If affordability is the issue, consider:

• Asking about salary sacrifice schemes (which reduce your National Insurance bill)

• Exploring additional voluntary contributions (AVCs) or pension top-up alternatives

• Speaking to your payroll or pensions officer for guidance

Can you rejoin the NHS Pension Scheme later?

Yes. If you decide to rejoin, you can apply through your employer. Provided you meet the eligibility criteria, you will be re-enrolled into the current NHS Pension Scheme (usually the 2015 Section).

Bear in mind that:

• You will not be able to buy back the missed pension years unless you take out Additional Pension agreements

• Rejoining may affect your pension age or the way your benefits are calculated

Final thoughts

Opting out of the NHS Pension Scheme is a significant decision. While it can offer more take-home pay in the short term, it means losing long-term financial benefits, tax relief, and valuable employer contributions.

If you're considering opting out, take time to review your Total Reward Statement, speak to your pensions officer, or seek advice from an independent financial adviser. The NHS Pension is more than a retirement fund — it’s a safety net for you and your family.