Opting out of a public sector pension

You can opt out of any of the big public sector pensions, but your own contributions are only part of what you give up. The employer contribution goes too, and in these schemes it is large: 23.7 per cent of pay in the NHS, 28.68 per cent for teachers in 2026/27, 28.97 per cent in the Civil Service in 2025/26. You also lose life cover, ill-health retirement and the guaranteed, inflation-linked pension the scheme would have paid for the time you were out.

What opting out saves you

The saving is your own contribution, less the tax you would have saved on it. Public sector schemes take contributions before Income Tax, so for a basic rate taxpayer each £100 of contribution costs about £80 in take-home pay. National Insurance is charged on your full pay either way, so opting out leaves your NI unchanged.

Take a hypothetical NHS band 5 nurse on £32,073. The contribution rate is 8.3 per cent, which is £2,662.06 a year. Opting out would add roughly £2,130 a year to take-home pay for a basic rate taxpayer, about £177 a month. The take-home pay calculator shows the figure for your own salary.

If you earn below the £12,570 Personal Allowance, you pay no Income Tax and so get no tax relief under these schemes. Opting out then saves you the full contribution. The pension tax relief guide explains why.

What you give up

For the same band 5 nurse, the NHS pays 23.7 per cent on top, which is £7,601.30 a year. For a teacher on M1 at £34,069, the school pays 28.68 per cent: £9,770.99 a year. If you leave the scheme, that money does not turn into salary. It stops.

The pension itself is the bigger loss. Each year of membership adds an amount of guaranteed pension that is revalued while you work and paid for life, with increases in line with prices once it is in payment. Buying an equivalent income privately would cost far more than the member contribution.

Membership also carries protection that you lose:

• a lump sum and family pensions if you die in service
• ill-health retirement if you become too unwell to work, which pays your pension early and in serious cases with an enhancement
• for LGPS members, an unreduced pension paid immediately if you are made redundant after the minimum pension age

Once you are out, none of these apply. If you became seriously ill during that time, you could not retire on ill-health grounds from service you were not building up.

Alternatives to leaving altogether

If the monthly cost is the problem, there may be a cheaper option within the scheme.

LGPS members can move to the 50/50 section, which halves the contribution and halves the pension built up but keeps full life and ill-health cover. For someone on £28,608, that cuts the contribution from £1,659.26 to £829.63 a year. The LGPS guide has the full bands.

The NHS, teachers’ and Civil Service schemes have no half-rate option. Your tier sets the contribution rate, and you cannot lower it by choice.

If debt or a sudden change in income is behind the decision, free debt advice services and your union can talk through options. Some employers have hardship funds or an employee assistance programme.

How opting out works

You opt out by filling in the scheme’s own opt-out form, available from the scheme website or your employer’s pensions or payroll team. Your employer cannot opt you out or encourage you to leave, which would be against the law on auto-enrolment.

What happens to your contributions depends on timing and how long you were a member. If you opt out very soon after joining, your contributions are usually refunded and it is treated as if you never joined. After that, the pension you have already built up stays in the scheme as a deferred pension, paid from your normal pension age. People with only a short period of membership may be able to take a refund of their own contributions, less tax, instead. Each scheme sets its own time limits.

Being put back in

Opting out is not permanent. Employers must put eligible staff back into a qualifying pension at regular re-enrolment dates set by law, and for public sector staff that means the main scheme. If you still want to stay out, you would need to opt out again. The auto-enrolment guide covers the thresholds and the timing.

You can also ask to rejoin at any time while you remain eligible. The scheme cannot backfill the period you were out, though some schemes let you buy extra pension later through added pension. The added pension guide explains the cost.

Your latest annual benefit statement shows how much pension one more year would add, which is a useful number to have before you decide. For questions about the scheme’s rules, contact the scheme administrator. MoneyHelper gives free, impartial guidance on your own situation, and a regulated financial adviser can give personal advice for a fee.