Shall I join company pension?

[Deleted User]

I have run my own business for 5 of the last 7 years and haven't contributed to a private pension during this time. Prior to this I worked for the local authority and have a small final salary pension I can take in 8 years.

The company I work for now have written to me today to say that they are enrolling me in the pension scheme with effect from 1st April unless I opt out. I only plan to work for another 5 years and am wondering whether it's worth me joining the scheme? It looks quite good on paper - I contribute 3% and my employer contributes 12%. I've worked out that will give me a pot of about £20 000 in 5 years time. What would my options be with such a small amount? Presumably any annuity i managed to buy wouldn't be worth having? The scheme is with Legal and General.

I would really appreciate any advice, thanks

redcard

Not sure why you would say no to a guaranteed 400% growth on your investment!

Southend1

Check if you will lose any means tested benefit by having a private income in retirement. Of course your local authority pension may already take you over any thresholds.

alexanderalexander

It sounds like your company pension scheme is effectively quite a lot of free money so of course you should take it. Worry about your options re what to do with the sum accrued later.

Southend1

alexanderalexander wrote: »

It sounds like your company pension scheme is effectively quite a lot of free money so of course you should take it. Worry about your options re what to do with the sum accrued later.

This argument appears time and time again on this board. But what if having a small private income means the OP loses housing benefit, council tax benefit etc because of it? This should be factored into the decision too.

Eric_the_half_a_bee

Southend1 wrote: »

This argument appears time and time again on this board. But what if having a small private income means the OP loses housing benefit, council tax benefit etc because of it? This should be factored into the decision too.

You're quite right of course. But what an appalling condemnation of a benefits system which encourages people to throw their money on useless carp, rather than provide for their own future.

Southend1

Eric_the_half_a_bee wrote: »

You're quite right of course. But what an appalling condemnation of a benefits system which encourages people to throw their money on useless carp, rather than provide for their own future.

If you're in a situation where having a small pension pot makes you worse off than social security then you're probably thinking more about spending the money on food or heating bills than useless carp.

alexanderalexander

Southend1 wrote: »

This argument appears time and time again on this board. But what if having a small private income means the OP loses housing benefit, council tax benefit etc because of it? This should be factored into the decision too.

I have never looked into this issue in detail, but surely the value of the benefits lost can never be greater than the income gained? Do you have any examples (with figures) of where this has become a live issue? I'm genuinely interested.

Also the OP should bear in mind investment growth.

Eric_the_half_a_bee

Southend1 wrote: »

If you're in a situation where having a small pension pot makes you worse off than social security then you're probably thinking more about spending the money on food or heating bills than useless carp.

A fair point, but the figures suggest that the OP is earning more than the state pension now. So, if he/she cannot afford food and heating now, what is the expectation upon retirement?

atush

so, you want to throw away 12% of your salary as free money and tax relief?

Surely as you ran your own business you can see that the above in a completely stupid thing to do>

Southend1

alexanderalexander wrote: »

I have never looked into this issue in detail, but surely the value of the benefits lost can never be greater than the income gained? Do you have any examples (with figures) of where this has become a live issue? I'm genuinely interested.

Also the OP should bear in mind investment growth.

Sorry I don't have any figures, I'm not that clued up about it to be honest. I'd be interested to see some examples too. But HB and CTB alone for 20-30 years of retirement could be worth a fair bit. Not a lot of scope for investment growth if OP is 5 years from retirement.