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?

Ah, I’ve worked it out... @keepgoingorstop you disagreed with me on another thread today - so you’re just taking an opportunity to be rude here. No wonder your aggression makes no sense in the context of this thread on its own. If you plan to follow me around MN disrupting people’s threads for your own little vendetta, I will report you to MN. It’s not fair to derail other threads 🤷🏻‍♀️

Don't opt out - especially as you are already in. It really is free money, and the tax & NI benefits are def worth it.

Tbf cocomarine knows a fair bit, but you pay an IFA to know everything and if they cock it up you can find redress through the FCA, FOS and FSCS. You can't on here 😂

There are IFAs that are specialise in pensions but I think it is pretty unanimous that people are telling OP to stay opted in.

@VestaTilley

Never ever ever ever ever opt out of a pension.

It is free money- tax relief and employers contribution. Plus, if it’s a defined contribution scheme your tax bill each month goes down as your pension goes out before tax is calculated. It’s worth far more if you take the money as pension rather than as cash now.

State pension is only about £7k a year and may be worth a lot less in 20/30 years time. You’d be mad to give up employers pension now.

Exactly this. Don't waste money on an financial advisor to tell you the same thing - unless you are looking at investing your money elsewhere, or feel you really can't afford to be paying in the contributions.

You're already in a very strong position for the future having already paid into a workplace pension for a number of years as you say, at only 28. Don't give it up now, let it work for you. Also the peace of mind it will give you over the next couple of decades cannot be overstated.

@TiddyTid

Tbf cocomarine knows a fair bit, but you pay an IFA to know everything and if they cock it up you can find redress through the FCA, FOS and FSCS. You can't on here 😂

Pensions are a kind of hobby 🤣 too much time on MSE. You’ll not find me posting about Salary Sacrifice though... definitely leaving that one to @VanGoghsDog 👍🏻

I have worked in payroll and associated areas for 20 years. I can tell you have never had someone say they regret contributing to occ pension scheme but so many people have said they regret opting out when younger, usually when they went on mat leave of part time. They either don't go back or leave it much longer than planned.

I always think you should consider your pension conts as being a statutory deduction, you have to pay it so don't think about it.

@maddy68

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

who will try and persuade you to opt out and buy a pension through them........

who will try and persuade you to opt out and buy a pension through them........

Hogwash!

If you've paid in for more than a year you can opt out but you cannot get the money back until you reach 55 so on that basis if you can afford it I would keep paying it in.

If you opt out, you may find that when you want opt back in, it's under worse conditions, i.e. higher contributions for longer, but get less out at the end.

I'm speaking only of public sector pensions.

Looking at your private pension at 28, is different to looking at it at 58, 68

Your state retirement is probably 68+

Look at www.gov.uk & login to the Government gateway
Currently you need 35 qualifying years for a state pension
You can see the estimated date & amount you may receive

Still want to opt out of a private pension ?

My vote is stay in the work pension

I work in pensions and have done for a fair few years. I am not a financial advisor though (the usual caveat ).

Current minimum pension age is 55 unless in cases of ill health. Obviously this may change if you aren’t retiring for another 30 years.

If you take a pension early it will either be reduced for early payment using factors calculated by the actuary (if a final salary scheme) or if you have DC pension pot you are effectively penalised by having to make it last 5 years longer eg an annuity from age 55 would cost you more than from 60. Early retirement factors in a final salary scheme can be very penal.

Tax wise... if you are a 40% tax payer now then it can be beneficial to put more into your pension to get the tax relief now and when you are eventually taxed at retirement and beyond you are likely to be a lower rate tax payer and so only pay 20% on it. Hence lots of execs contribute the max they can each year to their pensions.

A final salary scheme is excellent and (ignoring the potential failure of the sponsoring employer) you will get way more back then you ever paid in.

A dc pot of money is less great, but as a PP poster said, the earlier you put money in the longer it can grow for.

The very last thing (imo) you should do is opt out of a final salary scheme as you get so much from it. Otoh, if I had the choice between paying for necessities now or staying in a DC scheme I would opt out the DC and rejoin when I had the cash. Ultimately your needs now may trump your needs at retirement.

Re IFAs... I’ve seen some good, some less so. Many used to ask me questions about their client’s pension that firmly told me they had no understanding of final salary pensions at all. At that point you wonder if they’re getting good, knowledgable advice, from someone who understands the true value of the benefit.

@TiddyTid

Tbf cocomarine knows a fair bit, but you pay an IFA to know everything and if they cock it up you can find redress through the FCA, FOS and FSCS. You can't on here 😂

True but how can you prove it’s gone wrong? If I transfer my final salary pension out to a dc pot when I’m 50 will I have done better financially when I reach 65 say than if I’d stayed in the final salary scheme?

That is a tough question even if you have good pensions knowledge. It depends on the increases in the scheme to age 65 vs market returns, plus what you decide to do at retirement. The final salary pension provided may be far more generous than any annuity you could buy. It also depends on the individual’s wants and needs; they may value flexibilities from DC more than they care about the actual value.

The point I’m trying to make is that unless it’s a royal cock up, it’s very hard to see what might have been the best choice and therefore perhaps if they deserve compensation.

However. I do agree that at least an IFA has qualifications they can show you. None of us here can prove who we are!

@maddy68

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

I second that

Workplace Pensions usually come with a facility to seek advice. They should offer you an advice session with an opportunity to ask questions.

They didn’t do detailed planning for free, but were able to give a good overview and advice about your stage in life.

OP, how much is your monthly payment into your pension (your contribution, not your employers) and how much do you need to save for a deposit?

You should opt in, possibly even take out a private pension too.
Contact an advisor for advice but when you get older you will wish you had more pension pot, not less.
Slightly off thread, but if you are struggling contact your G.P. It’s been a truly horrible year, but it won’t last forever.

How will you be feeling at 80, still alive, but having to work still because you made a judgement at 28 that you didn't need a pension? All your friends are retired, going on holidays, spending time on hobbies, and you're being yelled at in McDonald's for getting someone's order wrong, or wherever you can manage to find a job at 80.

Talk to an advisor, but if you actually find one that says this is a good idea, I'd question their knowledge. I don't think even stopping it for a few years will be beneficial or get you a house much quicker.

How much are you actually contributing? I very much doubt it’s enough to be worth consulting an IFA. And I think you’d be mad to stop contributing to a pension. If you’re only 28 you’ve got decades of compounding and growth ahead of you.

Look up the effects of long term compound interest. You would have to be insane to give up now.
You need £100,000 for approx. £4000 of yearly income. So ideally £250k plus just to match the state pension.
It will also cost you far less now than in the future. You will be 40/50 before you know it and it will then be almost impossible to catch up.
My DD moans about paying a large amount into the Teacher’s scheme but it’s the best money she’ll ever spend.

Years ago in the 80s i left a job after a year of starting to pay into my pension . I had paid in about £500 and was entitled to the money back.They wrote saying they would send the money back, but i noticed that it was worth a few thousand if i left it in the fund. When i got to 55 they wrote to me about taking my pension, this fund was worth over 40K!!!! I have moved it to another pension fund for now

Bruffin the value of your pension increased from £500 to £40K over more than 30 years without your having to contribute further?

That appreciation in value is incredible. Beats property prices. Maybe the pension fund invested in apple, facebook or google.

Read carefully what happens to your money in the case you die in service.

My neighbour is also the daughter of a colleague who died in service while her daughter was still a child. The money her father received from what his late wife put into the pension and the employer's contribution helped with childcare costs, grieveance councelling and money to put aside for further education. It is not wasted if you die prior to retirement.

Your company should have someone you can contact about the pension scheme and ask questions.

Yes @blueshoes
As I said it was the amount of the contributions I had made which I was entitled to because I had less than a year contribution. At the time the fund was worth a few thousand with employers contribution etc which is why I left it.