Workplace Pension Opt-Out

WHy opt out. Employer is giving you extra 1% (minimum) of your salary for free. Employee doesn't have to contribute anything.

Mine is giving me 2% and I am not adding anything to it because I already have another personal pension contribution elsewhere.
 
QlimaxUK said:
IT HAPPENED!!!! :eek:

Everyone at my work has now been auto-enrolled in this pension scheme thing and I (and most others) want to opt-out of it, whats the best way to go about this? Is it best to do it online/phone or via the workplace itself?

and what does everyone here think of this, is it worth it? or is it better to just save it in an ISA or something...
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Why would you want to opt out of something you have no idea about?

In general, pension schemes are by far the best investment you can ever make You can instantly double your money for starters, and get that tax free.
 
krooton said:
Yep, if your company is matching your contribution, that is 100% interest right there ;)
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And you wont pay tax so that gives you another ~40%.

Compare these 2 scenarios:
A) Maxes company pensions.
5K of salary is matched by 5K from employer, 10K goes into a pension scheme
Pension is professionally invested, you have choices over risks vs rewards. Expect to get 5-7% return. No taxes due on any growth. Amount only taxed at withdrawl, e.g. retirement.

B) Person thinks they can do better them selves.
Takes the same 5K but doesn't get an employer match and has to loose 40% tax on it. They now have 3K to invest as they wish.hopefully they can get the same 5-7% returns, but whenever they withdraw the money they will have to pay capital gains tax, maybe another 30%.
 
DB_SamX said:
I recall my employer saying that the net would be 1% so they only contribute 0.71% effectively i.e. the 1% includes that tax benefit. Could be wrong through.
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Then they are being sneaky and lieing to you.

The pension contribution is tax free up to a certain high limit. If you pay in 10% then that comes from your gross salary before any taxes or NI reductions occur.
 
Where did you pluck the 90% certain you'll be better off from.
Don't opt out, you would be stupid.
Not only does pension come out pre tax, your employ has to contribute at least 1% of your wage on top that will raise to 2% in 2017 and to 3% in 2018. And many pay in more than that.

It seems you have no idea, haven't looked into it and for some reason peeved that it's forced on you.
 
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D.P. said:
Then they are being sneaky and lieing to you.

The pension contribution is tax free up to a certain high limit. If you pay in 10% then that comes from your gross salary before any taxes or NI reductions occur.
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They are not and I am not referring to my own contributions. This seems to confirm what I was getting to, although the tax relief percentage is different. I might have got the exact explanation and percentage wrong.

https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

How contributions work

Your pension pot builds up each payday with your employer’s contributions and tax relief. This is how it works if you’re in a defined contribution pension scheme.

Example

Each payday:

you put in £40
your employer puts in £30
you get £10 tax relief

A total of £80 goes into your pension each payday.
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No point in opting out, unless

A: You are very financially astute and a massive understanding of the markets (i would say most people are not)

B: Pay the mortgage off quicker, (but with house prices going stupid whats the point)
 
SPG said:
B: Pay the mortgage off quicker, (but with house prices going stupid whats the point)
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I would be pretty sure a decent pension fund will give you more in the long run, particularly if you're employer is paying in as well. Always get the most you can out of your employer when it comes to pensions if you can afford your side of it.
 
I believe there can be a reason to opt out, if you have a pension that is exempt from the life time allowance currently £1.25m you will be hit for tax for anything over this if you employer enrolls you and makes a contribution, even if it's a mistake you loose the protection.

I read Andy Bell's book on DIY Investing last year and as far as I can remember the above is accurate but I don't have time to read it again so only 90% sure.
 
id want to know exactly what happens when you come to claim. especially the age you will have to be and what sort or protection there is against the gov raiding it or devaluing it for whatever reason.

and dont forget you will pay tax on it eventually when you start claiming it :P something my dad never had explained fully on his council pension which was nice of them.
 
AndyT said:
Opt in. Can't see why you wouldn't want to provide for your future? I probably stand alone in that I don't want to be paying benefits to people who were too short sighted to think ahead.
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Spoken like a true product of the system.
Let me guess, you think the BBC license is a good idea too, right?
 
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GAC said:
id want to know exactly what happens when you come to claim. especially the age you will have to be and what sort or protection there is against the gov raiding it or devaluing it for whatever reason.

and dont forget you will pay tax on it eventually when you start claiming it :P something my dad never had explained fully on his council pension which was nice of them.
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There is no 'claim'. They're your savings and, from April 2015, when you reach retirement age you can access them immediately.

Yes, you do pay tax when you access them but you get tax relief when you save and pay virtually no tax whilst the money is invested. If you don't want to take risks then you can just invest into cash.

Opting out of pension contributions is nothing more or less than opting out of saving for your own retirement. For the days when you can not or do not want to work any longer.

Think of it as insurance for your old age, but you're the insurance company, with the bonus being that if you die early then your beneficiaries / estate get a whole chunk of money back anyway, hopefully more than you paid in.
 
stopper said:
Spoken like a true product of the system.
Let me guess, you think the BBC license is a good idea too, right?
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The license fee won't fund your lifestyle when you're no longer able to work. So no, it isn't a good way to fund your retirement.

Choosing not to save for retirement, be it in a pension, an ISA, a bank account, a business, a property - whatever you choose - is accepting that you will live on what the State is prepared to give you. Currently significantly less than the minimum wage.
 
The_Abyss said:
The license fee won't fund your lifestyle when you're no longer able to work. So no, it isn't a good way to fund your retirement.

Choosing not to save for retirement, be it in a pension, an ISA, a bank account, a business, a property - whatever you choose - is accepting that you will live on what the State is prepared to give you. Currently significantly less than the minimum wage.
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I don't see what the license fee had to do with anything!
 
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