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    • kmb500
    • By kmb500 28th Sep 17, 5:13 PM
    • 390Posts
    • 106Thanks
    kmb500
    Opting out of pension
    • #1
    • 28th Sep 17, 5:13 PM
    Opting out of pension 28th Sep 17 at 5:13 PM
    Hi, I am 21 and work for a local council. I pay in to my pension £105.67 per month as part of the LGPS scheme and my employer pays in £315 per month. I know the scheme is very good as my employer pays in 3x what I pay in, but I won't be retiring for 50 years and I could well be dead by then - I could really use the extra £100 now.


    I was looking at our pension information and it says that if you are considering opting out of the scheme then you should take financial advice as the tax and NI will increase. Going by the MSE tax calculator my income tax would increase from £151/month to £172/month. So in reality I will have £84 extra per month.


    Is this worth it? I currently struggle to save anything at all and basically live paycheque to paycheque. If I opt out of the pension I can put money in my savings account which seems to me more important than getting money when I'm near dead. But my brain tells me it's all a good investment... in the past year and a half that I've been working here I've earned 8 grand in my pension.


    Not sure what to do.
    Last edited by kmb500; 28-09-2017 at 5:18 PM.
Page 5
    • adonis10
    • By adonis10 2nd Oct 17, 1:03 PM
    • 1,455 Posts
    • 181 Thanks
    adonis10
    At your age you will obviously be thinking "oh what is the point in thinking about 50 years time" as you are young and it is a perfectly reasonable thought. I thought the same and had no thoughts of pensions or investments. I wish I had, although I did not start working properly until 24 post uni (if you can class 15k trainee salary as 'properly'!) so a few years after you. Anyway, just think ahead to when you are 31 (still young in the workplace) and if you stop now and don't start for a decade (just an example) you will have thrown away at least £36,000 of free (yes, FREE) money. That is purely based on your e'er contribution and does not take into account growth. Thirty six thousand pounds. All for the sake of an extra 100 quid a month.


    As has been said, the likelihood is that you WILL live well past retirement age and the chances of a lottery win are so slim that it should be considered an impossibility. The only other windfall really is a huge inheritance so, yes, if you know that this is coming then perhaps your retirement fund is sorted. I'd guess that you don't, though.


    I think it is generally accepted that the handouts from the government are only going to diminish in the future, you should really think hard about giving up such a lucrative bonus. Ok, you can't touch it until retirement but I can almost guarantee you that when you are 65-70 you will say "wow, I am so glad I did not opt out of that pension scheme".


    Obviously your call but I for one think it would be foolish to opt out. I would love to turn the clock back and contribute from when I started working.
    Last edited by adonis10; 02-10-2017 at 1:09 PM.
    • jeepjunkie
    • By jeepjunkie 2nd Oct 17, 1:15 PM
    • 1,370 Posts
    • 1,307 Thanks
    jeepjunkie
    The way things are going it is even more important to plan and contribute to retirement. Even pay into daughters PP. Cheers
    • enthusiasticsaver
    • By enthusiasticsaver 2nd Oct 17, 1:27 PM
    • 4,431 Posts
    • 8,242 Thanks
    enthusiasticsaver
    I am going to add my voice to the 100% posters advising you not to opt out.

    You are in your 20s so have your whole working life ahead of you. If you make good financial choices now this will have a massive impact on your lifestyle in later years. You are most unlikely to die before retirement although if you have an unhealthy lifestyle it may not be a very happy or healthy retirement. Short term thinking is never good.

    £84 in your pocket means you are turning down the contribution from your employers and the tax relief which if you remained in the pension scheme would probably be worth £100s each month. Retiring early will never be an option for you and you will be scrimping and scraping just as you have time to do things you may have always wanted to.
    Countdown to early retirement on 21.12.17 2 months to go.
    • bigadaj
    • By bigadaj 2nd Oct 17, 3:28 PM
    • 10,335 Posts
    • 6,632 Thanks
    bigadaj
    But why post here and ask for advice and then trash/ignore it?

    It is pretty much unanimous apart from Big that the OP should stay in the pension. Anyone not taking that into acct shouldnt ask in the first place.
    Originally posted by atush
    Because they want to justify their position, are looking for some support and then arent happy with others opinions.

    I don't like the haranguing nature of the thread, the OP is an adult and can make a decision, as I've stated before they should join the pension but if they don't it's their choice, personal responsibility is a rare concept now.

    People frequently and regularly make far more stupid choices than to not join a defined benefit public sector pension scheme, so on the scope of stupidity it's probably in the quite stupid rather than moronic bracket.
    • somethingcorporate
    • By somethingcorporate 3rd Oct 17, 10:51 AM
    • 8,835 Posts
    • 8,519 Thanks
    somethingcorporate
    Because they want to justify their position, are looking for some support and then arent happy with others opinions.
    Originally posted by bigadaj
    Exactly this.

    They want support for their ideas and even when it isn't forthcoming they still go ahead and do it anyway.

    They aren't here for debate or listening to others.
    Thinking critically since 1996....
    • somethingcorporate
    • By somethingcorporate 3rd Oct 17, 10:53 AM
    • 8,835 Posts
    • 8,519 Thanks
    somethingcorporate
    And what alternative do you suggest that usually works on science deniers and Donald Trump? Putting children on the naughty step isn't an option on an Internet forum.

    In any thread like this the responses to the OP cover the entire range of the spectrum of tact, from softly-softly through coldly logical to blunt. The OP can choose whichever they find most persuasive. Or, if the OP just wants to be told what they want to hear, they can go with the responses saying "Do it, it'll save me council tax".
    Originally posted by Malthusian
    Exactly - nothing will work because they have confirmation bias. They will pick the arguments they agree with and ignore everything else.

    This kind of thread happens all the time, the OP doesn't come to get an opinion but simply validation. Anything that disagrees with their initial idea gets ignored.
    Thinking critically since 1996....
    • dunstonh
    • By dunstonh 3rd Oct 17, 11:18 AM
    • 89,852 Posts
    • 55,456 Thanks
    dunstonh
    I don't like the haranguing nature of the thread, the OP is an adult and can make a decision, as I've stated before they should join the pension but if they don't it's their choice, personal responsibility is a rare concept now.
    Its one thing being an adult. Its another making adult decisions and being responsible like an adult.

    People frequently and regularly make far more stupid choices than to not join a defined benefit public sector pension scheme, so on the scope of stupidity it's probably in the quite stupid rather than moronic bracket.
    We are probably talking a loss in the hundreds of thousands of pounds here to save about £84 a month. There are not many financial decisions they can make in their life that are going to be as bad as that.
    • NIMBUS10
    • By NIMBUS10 5th Oct 17, 5:04 PM
    • 1 Posts
    • 2 Thanks
    NIMBUS10
    For what it's worth I (many years ago) nearly bailed out of my DB scheme.....and indeed I did in a way because when I was made redundant I transferred to pension to Lloyds private pension (they were my bank and this was in 1988) to which I added to each month.


    Luckily two things happened, firstly I was re-employed after 18 months by the same company...different part of the UK though and for some reason my Lloyds private pension was looked over by them and they said I would be better off if they transferred it back into my original scheme and they increased to transfer value to what it would have been had I left it in the scheme.


    When I was re-employed it was on the understanding that it would be under continuous service specifically for pension purposes, however as I was employed on 6 month contracts for a year or so I was unable pay into the pension. I did get a permanent contract and so restarted paying in to the scheme.


    Fast forward 16 years and I unexpectedly had a stroke at 49. After 6 months on full pay I had to see the company Dr who rightaway said "I think we should retire you". I left with an ill health pension which was enhanced as though I had completed 40 years service....I also for some reason got redundancy pay too!


    So really had I left the pension all those years ago and seeing how life turned out I would certainly not be as comfortable as I am now. I would say to the OP stay in the scheme at all costs.
    • darkcloudi
    • By darkcloudi 5th Oct 17, 5:45 PM
    • 494 Posts
    • 159 Thanks
    darkcloudi
    I was in the same situation as you, at the time I did take the money as oppose to putting it in the pension. Till this day I regret it as I lost out on the 6% the company was contributing and the tax relief on my contribution.

    Personally, if I was to go back in time I would put it in to my pension. I lost out 2 years of pension contributions due to this.

    If you put the money in a savings account you have more reasons to spend it as its more accessible, with the pension at least this money is put to one side and you know you have something when you retire.
    • OldBeanz
    • By OldBeanz 5th Oct 17, 7:52 PM
    • 692 Posts
    • 532 Thanks
    OldBeanz
    ...

    We are probably talking a loss in the hundreds of thousands of pounds here to save about £84 a month. There are not many financial decisions they can make in their life that are going to be as bad as that.
    Originally posted by dunstonh
    The most obvious one is to smoke and the OP hits that jackpot as well
    • Alexland
    • By Alexland 5th Oct 17, 11:31 PM
    • 451 Posts
    • 267 Thanks
    Alexland
    I missed an employer pension contribution for the month of September 2003 and it still bugs me. I joined a company and was late in completing the pension paperwork. With growth it would have been worth about £500 more in my pot by now and maybe £1000 when I retire. Annoying. I can't imagine how intolerably frustrating it would have been if I had opted out completely!!
    Last edited by Alexland; 05-10-2017 at 11:34 PM.
    • BobQ
    • By BobQ 6th Oct 17, 12:24 AM
    • 9,731 Posts
    • 12,677 Thanks
    BobQ



    Not sure what to do.
    Originally posted by kmb500
    To buy a pension that good you would probably have to earn 18% more and put it all in a personal pension, in addition to what you already pay. Is that a good idea?

    If you remain in the LGPS for 50 years you will probably be able to afford to retire earlier than that. Opting out you will probably not have the self discipline to invest in a pension at that level so a will probably never be able to afford to retire until you are 70.

    The trend in public sector pensions is that their benefits will decline and the cost to the members will increase. Far better to get 10 years in a better scheme in your early career.
    Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.
    • GibbsRule No3
    • By GibbsRule No3 6th Oct 17, 10:16 AM
    • 630 Posts
    • 363 Thanks
    GibbsRule No3
    When I started work 47 years ago, I knew what my take home pay was, so knew how much I had to spend and also knew that as a Civil Servant post, that I was in a Pension scheme, what that actually meant did not mean anything to me. The only time it was mentioned was when people compared what I was taking home and what other companies employees doing the same job were taking home, we were then told the extra money they got was going towards our Pension and we could always leave if we thought we could do better. It is only now that I realize how lucky I was. I think people should not have a choice, then they would not think I could be spending this money, certainly some needs to be taken directly from everyone and THEN the choice of paying more should be offered. I never earned a great deal over the years, so my retirement will give me as much as I take home per month now, well it will when the State Pension kicks in. 2020 now rather than 2018.
    Paddle No 21
    • crv1963
    • By crv1963 6th Oct 17, 10:33 AM
    • 130 Posts
    • 391 Thanks
    crv1963
    I'm with you GibbsRule No3 on this one. I think that is why the Govt brought in Auto Enrolment, but financial education is poor as many on the scheme seem to think it will give them a secure retired lifestyle when in fact they need to be saving much higher sums for this! Also people can of course still opt out.


    I suppose that there is no easy answer politically to this if you couldn't opt out then some would argue that they are having their choices limited.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • badmemory
    • By badmemory 6th Oct 17, 10:52 AM
    • 812 Posts
    • 792 Thanks
    badmemory
    I didn't work for a company paying into a pension until I was in my 50s & in most of that time had no access to any other form of pension (until my mid 40s they just weren't available). If I was back in my 20s I would say if my employer is prepared to put £1 into my pension if I put 80p in - where do I sign.

    Do you really want to live on the new basic state pension? At least because I had no access to other pensions I had SERPS. Could you live on under £160 a week. It doesn't sound too bad as a couple on £320 a week but can you guarantee that?

    Opting out is only a good option for your employer - definitely not for you!

    Are you seriously prepared to vote for a pay cut?
    Last edited by badmemory; 06-10-2017 at 10:55 AM.
    • badmemory
    • By badmemory 6th Oct 17, 10:57 AM
    • 812 Posts
    • 792 Thanks
    badmemory
    I'm with you GibbsRule No3 on this one. I think that is why the Govt brought in Auto Enrolment, but financial education is poor as many on the scheme seem to think it will give them a secure retired lifestyle when in fact they need to be saving much higher sums for this! Also people can of course still opt out.


    I suppose that there is no easy answer politically to this if you couldn't opt out then some would argue that they are having their choices limited.
    Originally posted by crv1963
    They should never have allowed an opt out without an IFAs positive advice.
    • adonis10
    • By adonis10 6th Oct 17, 10:59 AM
    • 1,455 Posts
    • 181 Thanks
    adonis10
    I'm with you GibbsRule No3 on this one. I think that is why the Govt brought in Auto Enrolment, but financial education is poor as many on the scheme seem to think it will give them a secure retired lifestyle when in fact they need to be saving much higher sums for this! Also people can of course still opt out.


    I suppose that there is no easy answer politically to this if you couldn't opt out then some would argue that they are having their choices limited.
    Originally posted by crv1963
    Absolutely this. It is absolutely astonishing that financial education is not on the National Curriculum (I assume it still isn't). Schools teach an awful lot that will never, ever be used yet something that every single person will require knowledge of for their entire adult life isn't. Truly bizarre and very worrying for future generations, especially given that we live in the digital and social media age which is increasingly encouraging people to "live your life to the max now", which is also known as "give all your money to x, y and z brands."
    • Andy L
    • By Andy L 6th Oct 17, 11:20 AM
    • 8,471 Posts
    • 6,778 Thanks
    Andy L
    I didn't work for a company paying into a pension until I was in my 50s & in most of that time had no access to any other form of pension (until my mid 40s they just weren't available).
    Originally posted by badmemory
    You posting well for someone over 100 then Retirement Annuity Contracts were available since 1956
    • badmemory
    • By badmemory 6th Oct 17, 11:20 AM
    • 812 Posts
    • 792 Thanks
    badmemory
    I believe that financial education is becoming more & more vital to the future of our young people. That a 21 year old I knew could, without ever having a job or any further education (so no uni) having not attended school since 15 (leaving age 16) run up debts of £21k is way beyond shocking. With HMRC now denying their charter responsibilities and throwing penalties at all & sundry.

    If these youngsters don't get some proper financial education soon their financial lives are in the bin. This should not be something which is effected by some government political agenda or an (even if well meaning) banks agenda. They need some proper independent advice.
    • badmemory
    • By badmemory 6th Oct 17, 11:23 AM
    • 812 Posts
    • 792 Thanks
    badmemory
    You posting well for someone over 100 then Retirement Annuity Contracts were available since 1956
    Originally posted by Andy L
    Well I guess I just wasn't rich enough, mid 80s was when I could access something like this. Tied up nicely with divorce, house move, impending poverty!
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