The data shows that the number of people who opted out of the NHS pension scheme went up by nearly 10,000 in the 2019/20 tax year to 50,399 people.

The Freedom of Information request also revealed that over the last four tax years, on average 44,843 NHS staff opted out of the pension scheme each year, a total of nearly 180,000 staff.

Quilter says that many of those opting out were likely to opt back in later on, known as the ‘hokey cokey’. This mechanism is used to try and reduce pension growth for the year to avoid being hit by Annual Allowance tax charges. 

Quilter says the Annual Allowance charge has been a focus for a number of years after it was revealed that doctors were reducing their hours due to complex pension saving rules affecting their retirement savings.

In some cases these rules penalised doctors with high earnings from working too many hours and saving too much into their NHS pensions.

Quilter believes that many of those opting out may have been looking to also mitigate against breaching the Lifetime Allowance (LTA), which was frozen in the most recent budget at £1,073,100. 

Separately, press speculation over the weekend has suggested that Chancellor Rishi Sunak may cut the LTA to help balance the books as government spending has soared in the past year.

Quilter says there is a common misconception that breaching the LTA means members should exit the NHS pension scheme, whereas it could still benefit many by staying in the scheme. 

Opting out can mean members exposing themselves and their families to a greater financial risk in the event of death or ill health, as benefits are reduced for a deferred member. 

Graham Crossley, NHS pension specialist at Quilter, said: “This data adds to the argument that we need to take a very careful look at the current pension tax system for the public sector and see whether it is still fit for purpose.

"The NHS has played a huge role in helping the country keep going during the pandemic and its worrying and sad to see that in last tax year significantly more people in the health service felt that leaving the NHS pension scheme was their best option due to a complex tax system that penalises the right behaviours.

“Opting out of the scheme may not be best course of action and can have a serious impact on someone’s pension provision, as well as their family’s financial protection, so is therefore not a decision to be taking lightly and it is worth first seeking professional financial advice.”