Opting out of pension

Terron

kmb500 wrote: »

Yeah, I would like to earn more money and when a more senior position comes up I will be applying for it, although I am pleased with my current salary for what it is, since I have nothing except some GCSEs to my name, I'm happy to be earning 22K at 21. If I was earning more money I'd be able to put more aside, but as it stands in the short term I think the extra money from opting out would help.

£22k is a decent saklary at 21. The average starting salary for graduates last year was between £19 and £22k. However in most jobs a few years experience makes a significant different to what you earn,

When I was 21 I graduated, but was then unemployed for 15 months (apart from afew days of temporary work.

kmb500 wrote: »

I don't have any big aspirations in life, just want to be able to get by, some time in the next decade would like to have a partner and kids get a house etc. but I can't save up for a holiday at the moment let alone a deposit on a mortgage.

So lets say you are looking for an average sort of life. The average salary for a full time worker is about £27k. That would be a reasonable target to aim for by your mid to late 20s. That should enable you to save several times the £84 for long term saving, save for a holiday, and spend more.

kmb500 wrote: »

Thanks. Yeah, I'm going to arrange to see someone in HR to discuss it.

You should probably also arrange to meet with HR or your manager to discuss your career progression, unless such meetings are automatic. Ask them what you need to do to make sure you qualify for the more senior position when it opens up, and is there any training you could do that would help.

zagubov

OP I cashed in my NHS pension at your age so I could have a bit of extra money. Worst advice ever. The person who gave me it can't bear to look me in the eye about it, they're so ashamed of it.

It's taken me massive efforts and huge costs to try to replace the lost pension and I'll never regain the lost benefits, but you can learn from my ignorance and not repeat the same mistake.

Please do that. The reason why most people are saying you should keep in the scheme is because of the wisdom of crowds/wisdom of the ancients/ common sense/ known experience/ call it what you will. You're just tapping into many many people's experience.

There's also a reason why you're the only person that thinks you should leave the scheme, but that reason involves you facing the limitations of your current situation vis a vis your future employment history. Which I hesitate to tell you, will progress by decades in the blink of an eye.

bigadaj

mollycat wrote: »

I read post #14 over again and can't quite get what part constitutes "sensible debate".

I realise that the urge to consider yourself one the forum's elite is quite strong, and this probably is the reason you arrogantly suggest who is suited to participate. I have to tell you, the forum is for everyone, whether they have 10,000 posts or 10 posts. Try reading others views with a more open mind and you will probably be less likely to misconstrue context.

Bravepants...I thought troll very early on in the thread also.

The irony.

The pension option is good and most people would benefit from taking it, but it's an individuals choice, the OP is getting slated and called stupid for opting out, it's unlikely to be a sensible mood but it's up to them.

In relation to an open mind then the slightly abusive and gang view on this is very sad.

dunstonh

People have an individual choice to put their head in an oven. However, it doesn't mean that we should support them exercising their free choice to do that.

When someone is doing something that is clearly very silly and irresponsible, it is right to point it out. When that person still gives the impression that they are going to do it, despite being told by everyone its bad, then you need to ramp up the criticism.

somethingcorporate

dunstonh wrote: »

People have an individual choice to put their head in an oven. However, it doesn't mean that we should support them exercising their free choice to do that.

When someone is doing something that is clearly very silly and irresponsible, it is right to point it out. When that person still gives the impression that they are going to do it, despite being told by everyone its bad, then you need to ramp up the criticism.

I agree to an extent but if they do not listen to the first 50+ replies with plenty of logical and factual reasons increasing the criticism will often just result in them digging in their heels further.

You see this kind of behaviour in science deniers and children (and Donald Trump).

Malthusian

Triumph13 wrote: »

I'm going to stick my head above the parapet on this one as some of the knee jerk analysis on this one may be slightly flawed. Yes it's screamingly obvious that the 'right' answer here is to stop smoking instead of stopping the pension, but if the OP did end up stuck in this same job until state pension age, what would the numbers actually look like? If we assume SPA will be 70 by the time he gets there, then he has 49 years to go in a scheme with a 1/49th accrual rate. He would therefore have 'scrimped and saved' until he was 70 in order to suddenly have a 55% increase in his take home pay on his 70th birthday when state pension starts and both NI and pension contributions stop.

I'm always up for a thought experiment but the idea that the OP might be in the same job for 49 years is almost too remote to be worth considering. If they do end up with "too much" guaranteed income they can always opt out and take the money when they are in their 50s. The earlier you pay in the better, even in DB schemes.

It would be the height of folly to say "I only need (say) 25 years so I'll opt out now and opt back in later". By then the OP could have been made redundant, or left for a better job, or the DB scheme could have been closed or changed to less generous terms - again.

Get it while it's hot.

If the OP does end up with 49 years in the LGPS scheme and "too much" guaranteed income, there is the possibility of a partial transfer. I don't think the LGPS offers them right now, but there's a concerted effort to get more defined benefit schemes to allow partial transfers and we're talking about decades from now. If we assume it's an option, they could take however much guaranteed income they need and transfer the rest into a defined contribution scheme, which they could then spend on the traditional Lambo or travelling round the world. Even if a partial transfer isn't possible, they can take out a loan against the "excess" income. Again, having money gives you options.

Malthusian

somethingcorporate wrote: »

I agree to an extent but if they do not listen to the first 50+ replies with plenty of logical and factual reasons increasing the criticism will often just result in them digging in their heels further.

You see this kind of behaviour in science deniers and children (and Donald Trump).

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".

Triumph13

Malthusian wrote: »

The earlier you pay in the better, even in DB schemes.

If you mean the longer you pay in for the better I agree with you. If you mean the earlier then I don't. By definition a 65 year old is getting WAY better value than an 18 year old for their same contribution as the 18 year old has to wait 47 years longer to receive that same (inflation adjusted) income stream. In almost all DB schemes there is effectively a cross subsidy from younger employees to older ones.
I've seen some DB schemes (not the LGPS) where the odds would have been strongly in favour of opting out for a 20 year old as the impact of compounding on the employee contributions should more than make up for losing the employer 'contribution'.

Get it while it's hot.

That I entirely agree with.

atush

somethingcorporate wrote: »

I agree to an extent but if they do not listen to the first 50+ replies with plenty of logical and factual reasons increasing the criticism will often just result in them digging in their heels further.

You see this kind of behaviour in science deniers and children (and Donald Trump).

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.

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.