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?

@VanGoghsDog, so could you tell me what area of the public sector that would be, out of interest?

In reply to those who queried my post about a £600k pension pot being needed to retire on, I'm thinking of my mother who has a monthly pension of £1600 including state pension. She has a very nice life on that. £750 comes from a teacher's pension, which I know is defined benefit and not defined contribution.

A £300k defined contribution pension pot would give c£15k a year in annuity obviously dependent on age/ health (although most people would opt for drawdown). So that plus state pension would give £1700 a month. For this to be a comfortable amount in retirement you'd need to have paid off your mortgage.

I do agree that the sooner you start pension saving the better.

4% drawdown on £300k is £12k a year. Plus state pension equates to c£21k a year in total. So whilst it wouldn't pay for world cruises, it is a reasonable amount to live on (with no mortgage or rent). Add in a partner with similar funds and 'cruises' start to come into play although not world ones.

I think equity release will become more viable for those without dependants or who don't have a big enough pension pot.

The current projections on what a couple will need to live comfortably in retirement is around £20k per year. Pension savings are important I’m afraid op but you are not mismanaging your money. Times are tough.

Hardly bent out of shape 🙄
I don’t think it’s helpful to post that most employers offer life insurance because people do read these threads without checking and might think, “right - that’s a thing? Good!” and have no cover as a result. Why would you not be accurate?

If you read the thread and what I was responding to it was clear what I meant, it was not a stand alone post, it was part of a discussion.

I don't think it's a great idea to declare on a public forum where I work, in fact it might actually be against my employment terms.

But I'm a public servant working in a non departmental government body. Of which there are many hundreds.

Can you show where you got your annuity rate? Because the standard rate currently looks like about 4%, which is £12k. Unless you need a "limited life" one.

And you 'lose' your capital.

The state pension which is c£9k doesn't start for most people until age 67 now, it will be going up (drawing from DC is due to go up to age 57 too) yet most people want (or expect) to stop or reduce work before this age.

If you retain your capital and go for drawdown you can draw down at any rate you want - £30k a year for ten years, £15k for twenty years etc. Hopefully you'd have increases due to investing which would mean it would last longer. Or draw the income but keep the capital for extras etc.

We tend to need less as we get older (ignoring the potential need for care home fees) so drawdown does give you that flexibility which an annuity does not.

@VanGoghsDog I have read the thread - in fact the person you responded to with your inaccuracy was me 🤣
So the context was pretty clear.
Would it have killed you just to say, “yeah that wasn’t clear - most employees don’t give separate life insurance?”

You're saying a different thing now. What are you actually suggesting I said incorrectly?

I was asking @VanGoghsDog because I am a retired local government officer, and it was always the case, and I can't see any change from a quick Google, that only by joining the superannuation scheme that death in service benefits would be paid. The general point that I was making in respect of the original query from @pensionoptions was that it is wise to check exactly what benefits are available from each individual scheme, as I know people who opted out of the Local Government scheme and have found themselves much worse off in retirement or when a death occurs.

I was also asking if you worked in local government or civil service, really, as the rules will clearly be different for those two organizations despite both being public sector.

This is a terrible idea sorry . Pension poverty is real

as previous poster said - don't do it unless desperate. you will need the pension money in ghe future and compound interest makes the current contributions much more effective.

your high childcare costs are temporary.
also look at other options like childminder/au pair, nanny.

in addition look at dh reducing hours slightly or if he can do compressed hours. where I work compressed hours (4x10 or 3x12) is quite common and would allow for one day less of daycare.

wrt to cars.
look into car sharing schemes.

our old car broke and we sat down with a calculator.
even if we used a car sharing car once or twice a week plus 2 weeks a year for holidays we would be quids in compared to buying/financing a car.

we can chose a car of the size we need. very small for me alone for the weekly shop. a van for going furniture shopping or to help friends move, a family size car for days out.