Pension - Can I opt out?

[Mercenary Keyboard Warrior]

This thread, and every one we see in GD always pains me to see.
The general understanding, misunderstanding and plain right nonsense that people talk about pensions is just horrible.

If your a tax payer (especially higher) and if your employer also contributes (which they pretty much must now) then its hard to beat the returns on a pension over a sensible period of time. You have to make the disclaimer of time as with them usually heavily stock market invested they can go down as well as up.

Take a normal rate tax payer, with an employer who matches. Say he contributes £100 a month from his wage. This £100 is paid to the pension fund, who automatically make up the basic tax, so they credit an extra 100/0.8 - 100 = £25. The employers £100 also goes in, so the net pot is £100+25+100 = £225, a return of 125% on day 1.
As mentioned compounding then takes place, assume 3% growth annual for 25 years and the £225 is now worth around £470. Thats a real return of over 6% per annum against the initial £100 saved.

There is a small group of people who realistically will be worse off by saving for a pension, those on very low wages who would CURRENTLY have pension topped up to a higher level to meet basic minimum levels of income. They will not benefit from a higher pension they would receive a lower top up, and also be worse off due to paying the contributions rather than having a slightly higher monthly/weekly income. Teh gamble of not contributing for people in this scenario is that the rules can (and probably will) change on minimum income.

There are far better pension freedoms coming so a significant portion of the shackles on a pension pot are being removed, and I think now that George has started this process we will only see more freedoms come. The industry is lagging behind still, its changed some of their business models and they aren't actually all that happy about it, but they will change and then the true flexibility will come through.

 

[MickeyFinns]

This may sound odd but I generally don't think I will make it to 65 / 70 years of age so I am going to opp out when I can, Don't get me wrong I am still going to invest some money just incase to be on the safe side but away that benefits me , I think its better to have money you can have direct access to when you want not when you get to 65!

You can access nearly all private pensions at 55 currently, but that will be changing to ten years before state retirement age. I'm personally hammering my pension as I intend to retire early.

 

[platypus]

I opted out of the pension already, have plenty of money saved and will have plenty when im old. Pension for me is not important.

I don't quite understand this. Are you against free money? I can guarantee that the select few millionaires are maxing out their pension allowances every year, whilst having savings elsewhere.

This may sound odd but I generally don't think I will make it to 65 / 70 years of age so I am going to opp out when I can, Don't get me wrong I am still going to invest some money just incase to be on the safe side but away that benefits me , I think its better to have money you can have direct access to when you want not when you get to 65!

I can draw one of my company pensions at 54, my French pension at 56, my current work pension at 60 and my state pension at god knows when.

And the problem with having access to when you want it, not when you retire is exactly part of the problem!

 

[Mercenary Keyboard Warrior]

Now Srrrrrrly it has all to do with Helping the People and all of that, for the greater good from this blatantly socialist gov ; it can't *possibly* be due to the pension fund lobbying who could definitely do with some more funds to play with.

Nah, bad me, need to go wash my mouth and all that.

We don't have a socialist government

 

[Glaucus]

This may sound odd but I generally don't think I will make it to 65 / 70 years of age so I am going to opp out when I can, Don't get me wrong I am still going to invest some money just incase to be on the safe side but away that benefits me , I think its better to have money you can have direct access to when you want not when you get to 65!

It's not odd to think like that, but you have to realise almost everyone thinks that.
And what you say is true, but you are forgetting that pension comes out your wages before tax in most cases and in most cases your employer will match you contributions to some degree.

So the vast majority of people are still better of using work place pension.
The rules also changed so if you die before 75 there's zero inheritance tax, after that, it's just what ever your normal tax rate would be.
At 55 you can also just cash your entire pot in and do as you please, first 25% is tax free.

 

[Mercenary Keyboard Warrior]

The 'people are living longer' statistic is made from people who retired at <60 and had 30 years to go fishing, nice and relaxed. These people have it fantastic and thus the age expectancy rocketed.

Source for this?

The reality is that people are in general healthier now than ever.
There is a growing gulf between rich and poor but thats not really seeing life expectancy falling for the poorest, rather its just not improving much, certainly if compared to the rich.

Certainly one of the surest ways to limit your life expectancy into old age is to plan to have no pension, so in effect to plan to put yourself on or as close as possible to the bread line when you retire. If anything is going to hasten your departure from this mortal life, its being unable to afford decent food, heating and accomodation when you retire.

 

[MrMoonX]

This may sound odd but I generally don't think I will make it to 65 / 70 years of age so I am going to opp out when I can, Don't get me wrong I am still going to invest some money just incase to be on the safe side but away that benefits me , I think its better to have money you can have direct access to when you want not when you get to 65!

Good luck with that, you obviously don't want the massive tax benefits of Saving in a pension pot

 

[matthab]

Started my pension at 20, employer matches what I put in. My misses on the other hand doesnt pay anything into her pension, despite many arguments.

 

[Richdog]

My misses on the other hand doesnt pay anything into her pension, despite many arguments.

That's ok, she will get half of yours anyway.

Seriously though, I don't even think I oculd be married to someone an incredibly short-sighted as to think they didn't need to pay into a pension fund. It beggars belief.

 

[MooMoo444]

Started my pension at 20, employer matches what I put in. My misses on the other hand doesnt pay anything into her pension, despite many arguments.

Have fun having to pay for everything, should you both reach old age! She won't have any money!

 

[Azza]

This thread is a mixture of face palms, laughter and geniue concern.

 

[balky12]

Have a plan, that's the key.

I don't care when the 'retirement age' (for state pension) is so to speak. I plan on having enough money to stop working by the time I'm 55. My plan is to max out the pot (£1.25m?)

Not as difficult as one would think, made a hell of a lot easier with a company pension. (mines 10% from company as long as I put in at least 5%. Currently put in 10%).

Assuming growth at 5% and I am hitting various salary marks (currently ahead by 6 years) ranging from 20k and 18 to 80k at 55. Only thing changing is my contributions at 40 onwards (up to 15% from 10%) I should get there. Hopefully.

Yes the goalposts would have changed before then but like I said, planning is key.

 

[D.P.]

This thread is a mixture of face palms, laughter and geniue concern.

Yes, it is just shocking how ignorant some people are. It just shows exactly why the pension hadn't have automatic enrollment. Really, it needs to go a step further, opting out of a pension should require a signed letter from a financial advisor with evidence of alternative financial goals.

 

[Spook187]

Yes, it is just shocking how ignorant some people are. It just shows exactly why the pension hadn't have automatic enrollment. Really, it needs to go a step further, opting out of a pension should require a signed letter from a financial advisor with evidence of alternative financial goals.

Have you ever wondered some people just don't have enough money to put away through whatever reason, it's nothing to do with being ignorant.

 

[Burnsy2023]

Have you ever wondered some people just don't have enough money to put away through whatever reason, it's nothing to do with being ignorant.

I'm sure this is applicable to some people, but they are certainly a minority when it comes to who complains about pensions who are ignorant.

 

[BusError]

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[cheesyboy]

Have you ever wondered some people just don't have enough money to put away through whatever reason, it's nothing to do with being ignorant.

This is true.

It's not illogical to forgo future planning when coping with the here and now is so marginal.

Similarly, delaying starting pension saving when you're at your poorest, knowing that you will be richer later on as salary increases, can also be perfectly logical.

In all cases, it's best to make those decisions from a well informed basis.

 

[Glaucus]

I'm sure this is applicable to some people, but they are certainly a minority when it comes to who complains about pensions who are ignorant.

As well as this, aren't the new rules, that the company has to pay in 1% regardless and they will increase this over the coming years. Meaning free money fir nothing, and absolutely no reason to opt out.

Or have I got the wrong end of the stick?

 

[balky12]

Also isn't it salary sacrifice. So your 5% contribution isn't a 5% loss in wages, as you get taxed less, etc.

 

[El Pew]

As well as this, aren't the new rules, that the company has to pay in 1% regardless and they will increase this over the coming years. Meaning free money fir nothing, and absolutely no reason to opt out.

Or have I got the wrong end of the stick?

For employers it's 1% now rising to 3% in 2018.

For employees it's 0.8% rising to 4% in 2018.

The employee contribution is before tax, so the actual loss in terms of take home pay is pretty small, I think mine was only about £15-20 a month.