Workplace pension. Opt out or not that’s the question?

[Londoner90]

So I have been paying workplace pension but I have been thinking about opting out and just have the cash now...
Any opinions on do it or not? I have always paid it, I believe I have been paying the minimum only but I’m thinking that what if I don’t make it to retirement 😂 yes a bit morbid but what if I am saving for something that will never come ...
I guess I can always opt back in, or can I ?

Can anyone help with this please?

It's free money.

I have a 23 year old DD and my advice to her is to opt in.

How old are you?

You will be auto enrolled every 3 years (from memory).

It’s rarely a smart move to opt out though due to the tax relief and extra cash your employer adds to it. Plus the cumulative effect is huge.

Alternatively, what if you reach 90, then what?

You'll hardly notice the money you're putting in now, it's unlikely to make a difference unless you're facing short-term hardship but the long-term gains are better.

What's your plan if you do opt out and live to beyond retirement age?

Given the tax and national insurance relief, what you would get added to your paycheck if you opt out would be much less than what you put into your pension. I think you'd be mad to turn down free money personally.

I wouldn’t opt out. Does your employer pay a share in for the share you put in? As the poster said above that’s free money. It’s better to pay in now and opt out later than the other way. Why do you think you won’t see retirement? Some people go on ill health retirement or early retirement and yes they probably get less than they would’ve done waiting to official retirement age but if they’d paid in at least then they’ve got a bit to tide them through.

Keep opting in.

The money works hard for you, with the employers contributions, the tax contribution on both yours and the employers. Any money you put in in future will not earn as much as money you put in now because it will be in for a shorter time.

Make sure you have named a beneficiary. You should be able to get in to your account and name the people you want as beneficiaries. Then if you don’t make it to retirement your children and / or DH will get the money. It doesn’t disappear. You can change the beneficiaries, and say what % of the pension to each.

I’m 28... I have always paid it and planned for the future but 2020 has been the year that totally broke me mentally (I know this year hasn’t been easy for many many orders too) and I just think that there is a slight amount of chance that I will ever make it to retirement..

Statistics on life expectancy say that you will make it. In any case, you’ll only have to make it to 57 (ish, I won’t go into the details!) to start withdrawing it.

You’ll be getting tax relief on your contributions and some from your employer too. Why would you give that up?

On the offchance it’s a DB pension, you’d be throwing away something quite valuable!

You can opt back in, generally - but if a DB pension, you might shut yourself out permanently from some favourable conditions.

Also, be realistic... would you opt back in? It’s easier to save money you’re not used to having. The things you’d spend it on now... paying down mortgage you might not regret, but when staring at a very frugal retirement you might regret it being spent on Starbucks 🙂

@Londoner90

I’m 28... I have always paid it and planned for the future but 2020 has been the year that totally broke me mentally (I know this year hasn’t been easy for many many orders too) and I just think that there is a slight amount of chance that I will ever make it to retirement..

I understand that 2020 has messed with a lot of people's feelings but there is a far higher likelihood of you making it to retirement than not making it to retirement. And once you have retired, particularly if your health isn't what it was, you are generally out of options for earning money. And that's when you would be glad of having paid in.

P.S and if you do make it to retirement, your beneficiaries still get what’s left if you run out before the fund does.

Occupational pension schemes are probably the best pension you'll find. No other type comes close. Stick with it if you possibly can.

You should be able nominate someone to receive some of the benefits, a beneficiary, should you pass away before receiving the pension.

No stay in.

@Londoner90 my personal view on “what if I die before I take it”... well, right now, aged 49, I am not at all worried about my retirement. That money I have waiting for me has already bought me peace of mind. That in itself is valuable.

Also:

• under certain circumstances, if I become critically ill I can access it
• I can access it anyway at 57
• I can leave it to people I care about

So for me, it’s far from something that might just be lost.

Keep it. And the earlier you start the better. You must have a pension. And you you get top up from employer and it’s tax free. Free money. I started a pension at 24. Wish I started earlier ...

I don’t want to spend it on Starbucks or clothes or anything like that... I always have been carful and saving money and not spending on crap. I would like to buy a flat or a house, a place I can call home☺️... not renting shitty places. I guess I will do a bit of research and talk to a few people. Based on the advice here it seems I should stay opted in, so will leave it as it is for now. But I will look into how easily I could opt out and back in a few years and pros and cons...

We're the same age, I fully intend to reach retirement age and beyond. I don't want to spend my entire life working to not have time to enjoy my hard work later.

What is it that makes you think you won't reach retirement? Health care is improving all the time, we know more now than we ever have. General health is improving along with life expectancy. People have increasing choice how to spend their life and retirement, I want to save and be able to experience that. At 28, without any underlying health conditions you are unlikely to die from covid, it is only the very unlucky with a high viral load or health conditions that are being seriously affect by covid in our age bracket.

You need to look to the future with more positivity. Covid will eventually be over, which I think is what is causing your downbeat view of aging and having a retirement fund.

Also, I was a beneficiary of a deceased parents pension, split 3 ways it amounted to less than £3500 per child. Do you want you child to inherit that little upon your death because you wanted to spend the money now? Your pension could see your kids through uni and beyond if you paid into it.

Don't take anyone on mumnets advice. Contact an INDEPENDENT financial advisor

What is the point of taking the money now if you cannot spend it properly due to lockdown?

Keep it in the pension where is works for hardest and longest and is one of the most tax efficient ways to save.

At 28 you cannot imagine being at pensionable age. I can guarantee you you will be there in a blink of an eye and be grateful your pension has had decades to grow. Leave it alone.

It would be extremely foolish to opt out. Even if you had substantial savings for retirement, the tax benefits and employer contributions still make a work pension worthwhile

Is the amount you’re paying in really big enough to make the difference between renting and buying a house? If it is then you could probably afford to reduce your contributions.

Apologies if I’m stating the obvious, but you know you can’t access the money already in your pension even if you do opt out, right? Sorry, it’s just I regularly see people asking that question (Work in financial services) and since you mentioned being able to buy a house I thought I’d mention it in case you were hoping to use it.

I see you want to use to buy a property.

I agree with Brighter. You cannot touch whatever you have already contributed but you if opt out, whatever you would have paid into pension in the future will be paid to you less tax. Is that increase per month enough to allow you to afford a property?

I don't have an opinion either way on what you do, but just to balance everyone saying you must, pension schemes can go bust and the money can disappear.

Happened with Woolworths - a family member lost their whole pension when they were made redundant.

Definitely get proper advice, not off Mumsnet though

Public or private sector?

if public, do not opt out. It's normally very generous, albeit average salary rather than final salary.

Private sector, get professional advice.

Even if you opt out, make sure you provide for your retirement.

Oh I fully understand that I can’t take out the money that I have already paid in 😂 thanks tho... I’m thinking perhaps if I opted out for a fe years the money I would have at my disposal would be great... but I guess there is no easy way.
I’ll take Maddys advice though and contact an advisor ☺️

There are different types of pensions. Pension schemes that go bust of the Woolworths sort are Defined Benefit or final salary schemes which are few and far between today. Most are Defined Contribution or money purchase schemes which are owned by and ring-fenced to the employee so they are unaffected by the insolvency of the employer. There is also the civil service pension which is the gold-plated variety.

Statistics on life expectancy say that you will make it. In any case, you’ll only have to make it to 57 (ish, I won’t go into the details!) to start withdrawing it.

Only with a massive reduction.