Opting out of the Local Government Pension Scheme?

[flowerpowerrrr]

I’m 31, single (post break up), no children. Since the breakup I’m struggling to make ends meet and have more going out than I do coming in- I’m debating opting out of the LGPS until I pay off my car finance and some other debts. Probably for around a year. I’ve paid into the scheme for 11 years at present. I know it’s a great pension scheme but I’m not sure I have any other options. I can’t cut back any more. Admittedly, I’m not very knowledgeable about such things- would it be majorly detrimental to opt out for a year in the grand scheme of things?

Don't opt out

It is a really good scheme - it’s defined benefit but essentially for every £1 you put in you’ll get about £3 (as employer contributions are able double yours) and it’s guaranteed to keep up with inflation etc. And it’s tax efficient.

Essentially you won’t see any benefit for 30 years or so, but it’s a really really good deal so if there’s any way you can ride yourself over but keep making contributions (maybe an interest free credit card?) then that would be really worthwhile in the long run.

Don't opt out. I opted out several years ago for a short period. Once you are taxed and pay NI, you are not that much better off. And then your employer also pays a contribution.
I started a private pension to try and recoup some of my pension loss. Opting out was false economy in the long term.

I would not opt out, however I think you can ask to reduce payments, you can find more info on here

https://www.gov.uk/workplace-pensions/if-you-want-to-leave-your-workplace-pension-scheme

Please don't open out. You'll regret it massively at some point. I have been where you are and although it was struggle I kept on paying. Over the years my circumstances changed and due to my pension I was able to retire at 53.

I believe you can ask to do 50%- you pay half the usual contribution and your employer pays half their usual.

I agree with pp 50/50 could be an option. Pay half get half. Also maybe contact your payroll and ask what your take home would be if you opt out. It won’t be as much as you think because of the tax relief.

The risk of opting out is that terms and conditions change to the detriment and you either can't get back in or you get in with worse T&Cs.

Also due to tax relief, you also don't save all your contribution, as it's taken before tax.

If you can pause contributions or reduce them to a very token amount, that might not be so bad, especially if you keep your employer's contribution. You could always catch up later.

Also ask if there's any hardship funds available, or could you get a second job, babysitting or a couple of shifts in a bar/restaurant in the evenings/weekends?

Another consideration would be that you've been contributing for a long time. 40 years is often a 'full' pension, yet by the time you reach state pension age, you'll have been contributing for 47/48 years, so your pension will be higher than standard anyway.

However, opting out of your pension is a very last resort, so have you honestly done everything you could do about your debts?

A debt management plan might be more appropriate and you'd be allowed to continue making pension contributions. Have a look at:

https://www.moneysavingexpert.com/loans/debt-help-plan/

Don’t do it! Go and read that long thread on pensions and see how crap most people’s pensions are, and then look at your forecast of what yours will be at retirement age. If you’re in local government you must be due a cost of living rise backdated to 1 April at some point between now and Christmas (unless you’ve already had this year’s?) which will help. Are you due any further increments or are you at the top of your grade? Any career progression opportunities?

don’t do it

Don't do it. There's other ways. Look on money saving expert com. Do a abudget.

Do not opt out. Speak to your pension provider about options, but in the end rescheduling your debts or debt advice would be a better option.

Don't opt out.

Look at a way to spread paying your debts out over a longer period maybe? Or is overtime an option?

Don't opt out, whatever you do . I know people that have opted out of similar schemes and are bitterly regretting it . Not only because they've lost out on those years in contributions, but also the employers contribution as well , PlUS the compound interest on all of that , and it really adds up more than you realise . They're literally tens of thousands worse off and they were out for less than 5 years . If you can can save money another way, then do it .

I administer the LGPS for my organisation (work in HR) - Don’t do it. Cut costs literally anywhere but here.

Yes don't do it. 50/50 as a last resort but do not opt out.

Don't do it. You're better off consolidating your debts and paying them off over a slightly longer period.

Opting out is a terrible, very bad, not good idea.

Don't do this. It's a great scheme. You're going to need a pension

My friend did what you are suggesting and it had had a massive impact on her pension. It really wasn't worth the short term gain.

Don't do it. It's really really hard to save for retirement when you're too close to it. Every pound you put in now will be worth 3 or 4 what you save in 15 years time.

This is the sad reality of the public sector - the salaries are so low, people can't afford to pay the pension. If you can save money anywhere else, thats the best thing to do as the pension will be needed- though it will still be based on a low level salary.

Don’t do this. Because it’s a pre tax benefit you’ll not end up much better off, and your employer won’t be making a significant contribution. You would be better off looking at generating additional income - a few shifts in a local pub or shop a week could increase your earnings by £4-5 hundred a month. Depending on your skill set you could pick up some evening tutoring at your local college or Uni, or some marking, lifeguarding at the local pool - whatever, but you should explore those first. It might be just the thing you need after a break up too - getting out and meeting new people.

As everyone has said opting out isn’t a great idea.

What options do you have to bring in some additional income? Could you do some bar work or hospitality work? I appreciate taking on additional work when you already hold down a job, but doing that for a year would probably be better than opting out of your pension for a year.

Don’t do it. Find another way. I know someone who opted out “just for a year” but then didn’t opt back in for 12 years & their pension is now tiny.