How long do I have to opt out? 25 October 2013 at 10:48AM edited 30 November -1 at 12:00AM in Auto-enrolment 15 replies 4.1K views

amiehall

I work part time while studying and am planning on leaving my current employer within the next 6 months. I was auto enrolled into pension on 1st October and have so far made one payment in the region of £2 :cool:

I don't think it's worth me continuing with these tiny amounts for this short time as the hassle involved in moving the pot later and the fees will surely soon eat up this amount of money.

I have not received any information about how to opt out yet, only a generic letter about 6 months ago. We were told a few weeks ago that we would be receiving information in the post. I know you only have a limited time to opt out, but does this lack of a letter mean the clock is not yet ticking? Or do I need to actively chase up my HR department this week?

Thanks

Thrugelmir

Is your employer contributing?

dunstonh

and the fees will surely soon eat up this amount of money.

Not possible.

Lots of people only intending to work for a short period are still employed by the same company 20 years later. Take the free money from the employer.

grey_gym_sock

is fees eating the whole of a small pension pot something that used to happen a few decades ago? but couldn't happen with current schemes?

dunstonh

grey_gym_sock wrote: »

is fees eating the whole of a small pension pot something that used to happen a few decades ago? but couldn't happen with current schemes?

It is something from the past. Old plans could have capital/accumulation unit set ups which saw early contributions go to the capital units which basically eroded away over time to pay fees. So, if you never paid into the normal units then it was a waste of money. Or some early plans had a variation of that where allocation in the early years was very low (sometimes non existent for the first 2 or so years). So, in the past, you had to be prepared to go beyond that early period and if you were not, then you wouldnt take out the scheme.

Today though, the only product charge is typically the annual management charge. An AMC cannot erode the value to zero. (caveat being that direct investment in a SIPP could see dealing charges erode the value but SIPPs are meant for larger investors with more investment knowledge and experience and they wouldnt do such things)

amiehall

dunstonh wrote: »

Not possible.

Lots of people only intending to work for a short period are still employed by the same company 20 years later. Take the free money from the employer.

We're paying in 1% each. I've been with my employer for 4 years but I definitely won't be there after Christmas. I would aim to start a pension when I join my graduate employer next summer. When I leave, I'd estimate there will be around £50 in there in total. Are you really saying I won't be charged any fixed fees?

I can't see the point of a pension pot that size. How hard will it be to roll it into another scheme later? While I do agree that I should accept free cash from my employer, £25 is hardly worth the hassle....

dunstonh

Are you really saying I won't be charged any fixed fees?

As mentioned in #5, the most common charging method employed nowadays is the annual management charge. That is a percentage of the value. Typically around 1%. That makes it impossible to erode the value to zero.

If you are really sure that you are going to be gone within a couple of months and its just £50 then maybe its not worth it. However, we cant tell how serious you are about that and its a common thing you hear from people who say the same but end up being there for years or decades after.

jamesd

For £50 it's not worth the costs of transferring. You may be completely unable to get anyone to accept a transfer of just £50 due to their costs just to process the transfer.

The management charges for staying invested can't usually reduce the value to zero but charges for transferring or taking an income eventually could end up doing that.

I suggest that you contact the pension provider urgently and tell them that you want to opt out and have your payment refunded. You have one month from being enrolled to get this done and get the money back. If you have had one payment deducted you have been enrolled, even if nobody has told you that properly. The clock is ticking and time is about to run out. If you have no idea yet what the pension company is, your employer has to tell you what to do to opt out if you ask them. Probably giving them a form they provide would do it.

amiehall

I am able to opt out of my scheme on the provider's website but I can't do it yet as it requires some kind of account reference number which it says will be provided once I have been enrolled

jonewer

amiehall wrote: »

I am able to opt out of my scheme on the provider's website but I can't do it yet as it requires some kind of account reference number which it says will be provided once I have been enrolled

The employer is obliged to let you opt out within one month from your enrolment date (its a bit more complicated than that, but thats close enough)

When you opt out, your contribution is returned and its as if you were never in the scheme at all.

You can at any time cease active membership of the scheme, but thats not the same as opting out.

I

jamesd

Ask your employer or the provider. If the money has been deducted from pay you must have been enrolled even though you haven't been told the number yet.

It might also be good to say which company the provider is in case we see a pattern of one particular provider failing to provide people with the ability to opt out.