Is my workplace pension worth it

westv

It's all very well having more pessimistic pension forecasts but when yet another poster comes along and asks "Why bother?" you do wonder what is the point?

Sea_Shell

Yes, surely this sending the "It's not worth saving into a pension" message... when at the same time, we're being told we should all be saving more!!!

xylophone

You might not actually benefit from tax relief on that pension then as it operates a "net pay" system.

https://workerspensiontrust.co.uk/members/members-faqs

If your earnings are below the starting rate for income tax (£12,500 2019/20) you do not benefit from the tax relief that a taxpayer would receive. However, this doesn’t affect the amount that is paid into your pension and you will continue to benefit from the money that your employer pays in.

It is unfortunate for non taxpayers that the scheme uses "net pay".

https://www.accountingweb.co.uk/tax/hmrc-policy/is-the-current-system-of-pensions-tax-relief-fair

Nevertheless, it would be unwise to give up a contribution from your employer.

Better to continue and pay into your SIPP as and when you can from your own resources?

Sea_Shell

OP, think if it this way..if your employer matches your contributions, you are DOUBLING your money straight off.

What other investment can do that!!!

AnotherJoe

dumbo wrote: »

I understand that I will lose £13 from my employer, but at today's assumptions I would only receive approx. £62 per month, which is almost equivalent to what I myself pay into the workplace pension. I only earn £11000 approx per year & im 47 years old & due to disability I don't expect to work past 60, if I'm even able to get that far. Can I transfer the amount which is transferable on statement into my SIPP, meaning I havnt lost anything? I don't really understand pensions, so please forgive my ignorance.

Those assumptions are rubbish (and are responsible for confusing and misleading many people including you.

Forget all the projections what it will produce as a pension and simply look at the total amount you are saving each month.
You can either put £15 a week of your own money into your employers pension plus £13 from employer, or £15 a week of your own money (after tax relief) into your own SIPP without the employers free £13.

Its pretty obvious that £15+ a free £13 is much more than £15 ! Nearly double in fact.

Yes, its that simple which is better.

dumbo

You have all been so helpful & I can now see the benefit of keeping it where it is, also I wasn't aware that pension predictions were so pessimistic. I suppose it's better to think you will only get £100 per month & get a nice surprise at the end & find it's more.
Thank you all for your wise advice.

Sea_Shell

Yes, years ago they used to predict something like 2.5%, 5% & 7%...if I recall.

Then they got told off for being overly optimistic and people were relying on those figures proving true and then they didn't materialise.

I think the quoted figures are industry standard and dictated by.....actually I'm not sure who?? FSA??

LHW99

To look at it another way - you may be adding around 9% to your potential state pension income by doing this.

dunstonh

It used to be 9,11 &13%. Then it dropped and spent a long period of 5,7 % 9% (for tax free investments - 4,6& 8% for taxable).

5, 7 & 9 seemed reasonable as this was the figures before charges. Medium risk funds over the longer term tend to be around 7% before charges (your bog standard balanced managed funds from insurers hit 6.5% after charges).

Maybe a move to 3,5 & 7% could have been sensible. However, now they are just totally daft.

I think the quoted figures are industry standard and dictated by.....actually I'm not sure who?? FSA??

The FCA set the requirements. Providers have to follow them although advisers can use alternatives that they consider suitable.