To opt out of pensions

[pensionoptions]

Sorry, posting here for traffic. And name changing cos of figures.

AIBU to consider opting out from pension contributions to free up a bit more money each month?

Disclaimer: I'm good with money, we are careful with what we spend. But I'm not that clued up on taxes, savings, etc.

Things have just got so expensive, we need to free up a bit more money each month.

I'm self employed and haven't contributed to my pension in 2-3years, cos I just can't afford to.

My DH works for a large corporate and contributes 12%, in return his employers also put in 12%. This is around £400 a month pre tax off his salary.

I think if he was to opt out he'd get a extra £300ish a month into the bank. However he'd be loosing £800 a month into his pension.

He thinks it's a good idea. I'm less convinced. But honestly don't know where else we can get £300 a month from. Maybe getting into debt or freeing up some equity from the mortgage be a better option?

Don’t do it. Find the money literally anywhere else

What are you going to live on in retirement?

Are you currently short of £250 in your present budget, or anticipating a shortfall when energy bills hike?

Personally I would exhaust every other avenue before giving up such a great pension benefit. It is the amounts paid in at this early stage that really reap the rewards of compound growth later.

Could you maximise your income anywhere else or reduce your outgoings at all, just to get you through the next year or two until the childcare costs come down?

If you are going into debt then it may be the only option but I really would look at reducing pension contributions on such a good deal as a very last resort.

I already work 4 days. Any extra hours would just be offset by the cost of childcare.

Just to put into perspective, OP - I also stopped contributing when my DC were small for about 6 years (genuinely couldn’t afford it, also self employed/short term contracts at that time). It’s going to take me a long time and lots of current cash to make up for that. My DH has never had a generous employer pension scheme ever. He and I now only get the basic 3% government mandated employer contribution as we work for small companies. Nowadays I DREAM of the employer match funding I was entitled to from the big corporate in my 20s… don’t let him give it up.

On no account should you do this. It makes a huge difference to your long term pot if you pause contributions, even if just for a few years. You’d be mad to do it.

Do not do this. You're going to need that pension

Can you talk us through your outgoings to see if there’s anything else that can be cut? I would really only cut pension as a very last resort

It is (probably) the most free money you will ever get given in your life.

Missing the point but why are you making student loan repayments when you bring home £15-20 a day afterwards?

I agree with other posters, workplace pensions that good are very hard to come by (I thought mine was good but my employer contributes 7%). I would do everything I could to make sure I didn't have to sacrifice that pension and set myself up for retirement.

Are you just planning on dying after retirement then?

Make some sensible, mature plans. And if you only earn 15 quid a day, a sensible mature job too.

Another thing to check… Is that contribution set up available to new entrants? My company has people on a myriad of legacy pension schemes, and once you stop or reduce, that’s it - and future change is into the much less beneficial scheme. Even if that 12/12 is their current offering, that could change whilst he’s outside the scheme.

Do anything you can to avoid it. I think I’ve been a pretty good pension saver over the years but my 50 something self would still tell my 30 something self to save harder if I could go back in time.
What’s your deficit?

I'm just echoing everyone else. Don't give up his pension and you really should be putting something into yours. I would cut back on other things. Budget hard.
I've just retired early and DH is by the end of the year. There were times we struggled to pay into pensions but so glad we did. We're almost mid 50's and it's such a relief to no longer need to work.

My business makes me more than what I made when employed. Plus gives me flexibility for if the children are unwell, which was the biggest factor in the move to self employment.

Last year I made around £30k pre tax, working 3 days a week. So around £1900 a month.

Unfortunately I'm an idiot that has two children under two and my childcare fees are £1700 a month for 3 days.

I'm not sure if it's a case of they'll match whatever he puts in up to 12%. We'll need to check that .

It's definitely defined contribution though.

Do you have any pointers of where to go for this?

Ideally for free, we can't afford a financial advisor.

As a short term absolute last resort because you can't afford the essentials and the situation is becoming dire, then yes I'd cancel the contribution. In the immediate term, food and a roof over your children's heads comes first.

But I would look into every single other option first and it sounds like you're not in dire straits yet! What do you need the money for? Can you cut back other areas? Do you have any areas where you waste money / spend unecessarily? Can you increase the money coming in another way?

Maybe reduce the contribution temporarily but do not ever give it up. This will be unrecoverable

I make around £15-20 a day after childcare.

It's project work working with teams that are 5 days a week. So 3 days plus logging on in the evenings on my off days is really the minimum. Any less and I just wouldn't get the contracts.

I'm keen to stay in work, I have clients that return to me regularly. If I leave for a few years they'll go to someone else and probably never come back.

This is helpful, and my main concern. We'll just end up never opting back in.

“I'm not sure if it's a case of they'll match whatever he puts in up to 12%. We'll need to check that”

He really does need to check that before declaring what’s a good idea or not!

Agreed.

OP, yes you'd get some extra money in pay packet today, but just be eyes wide open that today's you is absolutely kicking your future self in the arse very hard.

Not only giving up free money from the company, but also your own deductions / savings that are tax free. Plus all of that lovely compound interest that will build up over time.

If you still want to give it up, then do so.

If nothing else your employer will be very thankful you've generously agreed to the same work but gifted them a free reduction in your overall comp & ben package!!

You wouldn't need childcare if you work when your husband is at home?