To opt out or not??

howlets

Hi all
Me and my little family are struggling...we're not at the point where we're behind on anything yet, but money is so tight it's bound to happen soon.

I've reduced my outgoings/shopped around for the best deals on phone/broadband/insurances etc and my only real "non-essential" outgoing is my Local Government pension - I pay £120, my employer doubles it.

As I'm only 34, my mind keeps telling me to opt out as it wont be worth anything by the time I do come to retire, and I need the money so much more now. But the other half tells me I'm being daft as it's such a "good pension" (if there is such a thing!)

So...should I opt out, save myself £120 a month and put it to better use? (one thing I would do is get another life insurance policy, to cover the death in service benefit I'd lose). My mortgage is massive, so I could overpay on that or just use it for everyday essentials. At some point in the future I will inherit half of a £250k house, so that will clear my mortgage by the time retirment comes anyway.

I don't know....any advice would be most appreciated.

Thanks

dunstonh

my only real "non-essential" outgoing is my Local Government pension

Interesting that you class it as non-essential.

I pay £120, my employer doubles it.

£120 before tax relief and NI. So, its actually costing you less than that.

As I'm only 34, my mind keeps telling me to opt out as it wont be worth anything by the time I do come to retire

Why wont it be worth anything?

I need the money so much more now.

Why wont you need an income in retirement? Do you fancy living on just a basic state pension of £5200 a year?

But the other half tells me I'm being daft as it's such a "good pension" (if there is such a thing!)

There is such a thing and this is one.

So...should I opt out, save myself £120 a month and put it to better use?

You wont save £120pm as that is the gross figure. What could be better than £240 worth of money costing you around £90?

one thing I would do is get another life insurance policy, to cover the death in service benefit I'd lose

That takes the £90 down to around £75, possibly less.

My mortgage is massive, so I could overpay on that or just use it for everyday essentials.

£75pm on a mortgage is barely going to make any difference.

At some point in the future I will inherit half of a £250k house, so that will clear my mortgage by the time retirment comes anyway.

So overpaying the mortgage seems like a pretty poor option compared to the pension.

atush

Does your OH work? If not, tell them to get out there. Can you do other things to make money?

Got a spare room? Rent it.

Got a drive in greater london? REnt it out to someone?

Got a loft full of stuff? Flog it on ebay.

Drink coffee when out? Go down to the pub? Smoke? You could spend more than 75 Quid on this lot a month easy.

Basically, find another way out of your overspending trouble. Don't opt out of this pension.

Squire_Fulwood

Yes ...........everything he said ^^^^^

Loughton_Monkey

howlets wrote: »

I've reduced my outgoings/shopped around for the best deals on phone/broadband/insurances etc and my only real "non-essential" outgoing is my Local Government pension - I pay £120, my employer doubles it.

So for every £80 you pay in, the employer pays £100. Or put another way, £80 becomes £200 overnight!

How can this possibly be viewed as "Non Essential?"

It is a matter of human behaviour that we all think in terms of "we cannot afford this.... or that...." We all tend to think that way. But only those on extremely low incomes really have an excuse.

We should start by understanding the fact. An the fact is that unless we ensure roughly 20%/25% of gross earnings to be invested for retirement, we get a miserable pension. So the 'squeeze' comes at retirement.

Then, as for saying "I can't live on 80% of my salary......", it has to be seen as a matter of choice. Someone down your street is living on 80% of your salary.

Lifestyle (and the cost of it) is an emotional thing. We all enjoy what money buys. Once anyone makes the mistake of spending 100% of income, then it's extremely difficult to cut down. This is why it's best never to get up to that point. A corollory to this is that by spending 100% (or very near), the 'drop' you have to take much later in life doubles. It drops to what you should have lived on, then additionally it drops by what you didn't invest.

CLAPTON

howlets wrote: »

Hi all
Me and my little family are struggling...we're not at the point where we're behind on anything yet, but money is so tight it's bound to happen soon.

I've reduced my outgoings/shopped around for the best deals on phone/broadband/insurances etc and my only real "non-essential" outgoing is my Local Government pension - I pay £120, my employer doubles it.

As I'm only 34, my mind keeps telling me to opt out as it wont be worth anything by the time I do come to retire, and I need the money so much more now. But the other half tells me I'm being daft as it's such a "good pension" (if there is such a thing!)

So...should I opt out, save myself £120 a month and put it to better use? (one thing I would do is get another life insurance policy, to cover the death in service benefit I'd lose). My mortgage is massive, so I could overpay on that or just use it for everyday essentials. At some point in the future I will inherit half of a £250k house, so that will clear my mortgage by the time retirment comes anyway.

I don't know....any advice would be most appreciated.

Thanks

you misunderstand the LGPS; your employer put in double what you put in i.e for every 100 you put in the employer puts in 200 so you end up with 300;

for every 100 you out in the tax payer gives you back 20

if you don't contribute then your NI which is currently at the opted out rate of 10.4% will rise to 12%

and of course the death is service benefits are very good with cash sum of three times your salary plus a pension for your OH and your children

this is absolutely fantasic value

maybe you should post up details of your budget that you consider essential (10 years ago no-one had broadband, very few had mobile phones and life didn't stop)

howlets

Thanks everyone - that's made it all much clearer (and made me feel a bit silly for even thinking about opting out!!). I will stick with it and see where else we can save some pennies.

atush

Good news howlets.

We weren't being mean (when we tell the truth some take it that way) we were just thinking of your best interests.

I do think any time you get into the habit of spending 100% of salary or more, you are on a slippery slope to disaster. And some of us, me included, have been there when you say, get preganant with twins who weren't on your 'plan'. Redundancy, family troubles, whatever.

But in your case i'd shimmy right on over to the Debt free board as I feel form what you said you are carrying some and it is dragging you down as inflation is rising. Even if you don't have debt, they can help shave spending and if you do, they will be even more help. So go on over, post your SOA and then see what others can help you with.