New job - should I opt-out of pension?

dunstonh

I'm not actually sure if I'll be able to transfer at the end of the contract - can ANYONE do that with ANY pension?

If its a defined contribution scheme then yes you can.   (from what you describe, that is what it is)

Albermarle

I can contribute anything from 4-8% and the employer tops up to 10%.

Probably worth pointing out that 10% from the employer is relatively generous. Some only contribute the minimum 3%.

If you added 18% to a pension ( or many different ones ) for 20 years , you should have quite a nice pot.

Marcon

BigBoss said:

I have just started a new role that will last between 6-12 months. I can contribute anything from 4-8% and the employer tops up to 10%.

I am considering opting out because the length of the contract will mean that the final contribution won't be that much.

Thoughts?

Join and you'll have employer contributions you wouldn't otherwise have had; and tax relief on your own contributions. OK, it won't be a huge pot - but in the immortal words of Tesco...!

El_Torro

Just to clarify, how much is the employer contributing? The way you've worded your posts they will pay 6% if you contribute 4% and 2% if you contribute 8%, since they top up to a total of 10%. Which doesn't sound right as legally your employer should be contributing at least 3%. 

Assuming your employer is following the law then yes, you should take whatever they give you, and you should contribute enough to get the maximum amount they will give. You may want to contribute more, depending on your circumstances. If you only stay a few months you can always transfer your pension to your next employer's scheme.

BigBoss

After reading more around this, I'm now a little clearer on this pension and what it means etc. It's a salary sacrifice or "smart" pension.

My only concern, given that I do plan on leaving this role within a year, is whether or not the second disadvantage listed here will apply to me

https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/salary-sacrifice-and-your-pension#disadvantages

namely:

If you’re in a defined benefit scheme and you leave it in the first two years, you might not be able to get a refund of your contributions. This is because any salary sacrifice contributions would count as employer contributions.

NedS

BigBoss said:

After reading more around this, I'm now a little clearer on this pension and what it means etc. It's a salary sacrifice or "smart" pension.

My only concern, given that I do plan on leaving this role within a year, is whether or not the second disadvantage listed here will apply to me

https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/salary-sacrifice-and-your-pension#disadvantages

namely:

If you’re in a defined benefit scheme and you leave it in the first two years, you might not be able to get a refund of your contributions. This is because any salary sacrifice contributions would count as employer contributions.

No, I don't think so. Everything you've described to date indicate the pension scheme is a DC (Defined Contributions) scheme, not a DB (Defined Benefits) scheme.

LV_426

ischofie1 said:

Opt in. 

You’re opting for a 10% pay cut + the tax saving from your own contribution if you don’t. 

Any money built up can be transferred to another scheme further down the line. 

Also another word of warning!
I worked with a colleague who didn’t opt in our DB scheme but decided to start his own private pension instead because he didn’t expect to stay long. 

20 years later he is still there. 

You never know what life throws up. 

Ouch! That's got to hurt. A former colleague was persuaded to leave the DB scheme they had in my first job, in favour of a personal pension. I thought at the time it was a really bad decision.

Marcon

BigBoss said:

After reading more around this, I'm now a little clearer on this pension and what it means etc. It's a salary sacrifice or "smart" pension.

My only concern, given that I do plan on leaving this role within a year, is whether or not the second disadvantage listed here will apply to me

https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/salary-sacrifice-and-your-pension#disadvantages

namely:

If you’re in a defined benefit scheme and you leave it in the first two years, you might not be able to get a refund of your contributions. This is because any salary sacrifice contributions would count as employer contributions.

For anyone just joining a DB scheme, it's certainly checking. If you leave before completing two years of scheme membership, many schemes (especially in the public sector) allow you to transfer out your benefits to another scheme, provided you do so fairly soon after leaving the DB scheme.

Albermarle

ajfielden said:

ischofie1 said:

Opt in. 

You’re opting for a 10% pay cut + the tax saving from your own contribution if you don’t. 

Any money built up can be transferred to another scheme further down the line. 

Also another word of warning!
I worked with a colleague who didn’t opt in our DB scheme but decided to start his own private pension instead because he didn’t expect to stay long. 

20 years later he is still there. 

You never know what life throws up. 

Ouch! That's got to hurt. A former colleague was persuaded to leave the DB scheme they had in my first job, in favour of a personal pension. I thought at the time it was a really bad decision.

As above , from what you have said your pension is not a defined benefit scheme, so this would not apply . At the end of your contract , you should have a pension pot, that you can leave alone , or transfer to the next pension you get . Transferring this sort of pension is easy .

atush

BigBoss said:

I have just started a new role that will last between 6-12 months. I can contribute anything from 4-8% and the employer tops up to 10%.

I am considering opting out because the length of the contract will mean that the final contribution won't be that much

Thoughts?

My thoughts are, dont opt out.  Big mistake, turning down free money and paying more tax.