Public Sector Pension - Opt Out?

Foxtbh

Hi guys,

Just a quick one. I know generally the advice regarding public sector final salary pension schemes is that they are very very good and opting out is ill advised.

I have recently graduated from University and begun my first job - within the public sector. I am currently contributing to the pension scheme, to the tune of around £140 a month.

This seems like a sizeable amount of money and i do not intend to spend the rest of my working life in the public sector. If I am honest, then I intend to move to the private sector in the near term rather than the long term.

With this in mind, is it really worth contributing to this pension or should I opt out and withdraw my current contributions?

I appreciate it would be great if it was a career for life but I'm not so sure it is.

Thanks.

CLAPTON

to buy the equivalent would cost you about 400-500 per month
so by all means save us taxpayers a few hundred quid by opting out
or continue to make the best investment of your life.

olivetti

Foxtbh wrote: »

This seems like a sizeable amount of money and i do not intend to spend the rest of my working life in the public sector. If I am honest, then I intend to move to the private sector in the near term rather than the long term.

There are quite a few in the Civil Service that have said that and almost as many that are still there decades down the line.

Will you really be moving on given the state of the economy and the job market?

barney77

Hello,

It is my understanding that you can reclaim pension contributions that you have made up to 2 years of joining the scheme (it is in the NHS). Therefore in that case, if you were to leave within that time period, reclaim the contributions that you have made. If you do not leave within that time frame, then it is money well invested. Once you get into the mind set of paying it out each month (you would not get the full 140 quid back anyway, due to it being deducted before tax/NI), then it isn't so bad!

Barney

dunstonh

I am currently contributing to the pension scheme, to the tune of around £140 a month.

You are not paying that in real terms though. If you opt out of the scheme, you will not get £140 in your pay. You will get tax deducted against it and your NI will go up.

This seems like a sizeable amount of money and i do not intend to spend the rest of my working life in the public sector. If I am honest, then I intend to move to the private sector in the near term rather than the long term.

£140 is not sizeable. In fact its not far off the level most personal pensions have their minimum (£100pm). If you think its sizeable then you need to read up and learn about money a bit more I'm afraid.

As a taxpayer, please opt out. However, you would be daft to. Even if you only stay there for a short period.

Foxtbh

I appreciate I will not get £140 a month extra in my pay packet. I calculate that with the increase in national insurance payments, I'd end up about £80-90 a month better off. I also did not mean it was a sizeable amount in the context of pension payments. I also appreciate that, if I intended to remain in my current position for life, it is an astonishingly good deal.

However, I don't. Without going into specifics its probably not my intended career path. I enjoy my job and it suits me in the short term, but long term, the reason I went to University in the first place, lies elsewhere.

So, in isolation then - is it worth paying into the pension if you intend to leave the organisation many decades before ever being able to claim the pension?

DreamerV

I'm in the civil service, having left university, and went into the civil service for max 1 yr. I'm still there and it's been 2.5 years...although I'm leaving in early October. After I did one year, I realised I'd be foolish to leave and get a slightly higher paid job, when if I could stay 2 years, I'd be entitled to this pension when I'm older. I contribute 3.5% towards the running of the pension scheme, whereas my employer contributes 18.5% (ish)....I get 2.5% of my annnual pensionable salary for this, and it goes up with RPI. This is excellent value. If I join the private sector later (going to uni in Sept, then hoping to rejoin HMRC, but if I can't, I'd go into private sector), then it's quite possible that their pension scheme will not be great anymore, and also not be safe. Some private sector people rely on a public sector pension they paid into for only a short period many, many years before they retired (although the old scheme was better than the new one, given). I knew how important this pension could be for me, in fact, that I actually voluntarily paid in extra. Now when I leave, at least I know there was some worth in my efforts (I've slogged my guys out for my employer).

In short, don't opt out. Even a good job in the private sector will not guarantee you a good pension.

Liquorice_Twirls

Your contributions will build up and can be subsequently transferred to a private scheme so it's not as if you would be losing them. I think that we all need to save for as long as possible for our retirement as I am pretty sure it will get cut back before many of us get there.

dasherman

Foxtbh wrote: »

So, in isolation then - is it worth paying into the pension if you intend to leave the organisation many decades before ever being able to claim the pension?

erm.......Yes!

Foxtbh

Thanks for the advice guys. As its quite obvious, I dont know an awful lot about how this works, hence asking you lot!

Imagine I paid into this pension for 18 months and then left to work in a private organisation for the next 40 years. After this 40 years, what benefit to me would that initial 18 months have been in this scheme?

FATBALLZ

Foxtbh wrote: »

Thanks for the advice guys. As its quite obvious, I dont know an awful lot about how this works, hence asking you lot!

Imagine I paid into this pension for 18 months and then left to work in a private organisation for the next 40 years. After this 40 years, what benefit to me would that initial 18 months have been in this scheme?

Probably as good a benefit as any 18 month time period of your career.