Auto enrolment affecting student loan

daveyjp

Absolute madness to opt out of LGPS.  Don't look at what it costs now, consider what it will cost if you don't opt in.

Each year your contribution buys 1/49th of salary, inflation proof.

 Even a few years contributions means a decent payment. You also miss out on valuable life insurance, 3x your salary is paid to a nominated person should you die in service.  In future valuable AVCs may be something you want to consider, potentially tax and NI free.

If money is tight there is an option of choosing the 50/50 scheme where you pay half contributions for half the pension, but maintain full life cover.  This may be an option for a few years and then go to the 100% scheme.

Forget the 28% employee contribution, that's just an actuarial figure and makes no difference to your benefits.

r6mile

Opting out of a DB pension scheme is insanity! 

Pat38493

r6mile said:

Opting out of a DB pension scheme is insanity! 

Well to be fair to the OP, if you are literally in the position that you can't put food on the table or pay your rent, it might not be so insane as you won't need a pension if you starved.  However in many cases there can be at least some way to claw back £30 a month net so sometimes it could be done with a rethink.

NedS

Tinkywinks108 said:

Thanks for your replies all - I am going to have a serious re-think about opting out.
It's telling that the replies so far are all championing the LGPS - so I am going to reconsider my decision. 
And I think I'm being underpaid actually and in the process of sorting this out - which means my monthly budget would be higher than it currently is. 

That would be possibly the best financial decision you ever make. LGPS (and Civil Service) pension schemes are about as good as it gets. Commonly referred to as 'gold plated' for good reason.

If you are still not 100% sure, or just want to pat yourself on the back realising how you have just dodged a life-changing bullet, take a read of this recent thread about a guy who wasn't so lucky and didn't have anyone to advise them not to opt out:

https://forums.moneysavingexpert.com/discussion/6434292/is-this-one-of-the-worst-financial-decisions-ever/p1

Dazed_and_C0nfused

Tinkywinks108 said:

Dazed_and_C0nfused said:

(I wish to opt out permanently)

Very odd.  Assuming it's LGPS then that means you will almost certainly be paying more tax than is necessary. 

Never mind effectively taking a huge pay cut 😳

It is LGPS - so I'll be paying less tax if I opt in? 

Normally yes.  Very low earners might not.

Say your salary is £25,000 and you pay 8% to LGPS.  That's £2,000/year.  

But the LGPS pension contributions are deducted before tax is calculated so your taxable pay is only £23,000.  Meaning you pay £400 less tax so the real cost of the pension is only £1,600 not £2,000.

coyrls

Dazed_and_C0nfused said:

Tinkywinks108 said:

Dazed_and_C0nfused said:

(I wish to opt out permanently)

Very odd.  Assuming it's LGPS then that means you will almost certainly be paying more tax than is necessary. 

Never mind effectively taking a huge pay cut 😳

It is LGPS - so I'll be paying less tax if I opt in? 

Normally yes.  Very low earners might not.

Say your salary is £25,000 and you pay 8% to LGPS.  That's £2,000/year.  

But the LGPS pension contributions are deducted before tax is calculated so your taxable pay is only £23,000.  Meaning you pay £400 less tax so the real cost of the pension is only £1,600 not £2,000.

OP won't be in the very low earner category, as they are making student loan repayments.

MalMonroe

I'd just like to say that, as someone in their (early!) 70s, I wish I had paid into any available pension fund I could have when I was younger. I did live and work overseas for a number of years but when I returned to the UK I had jobs where pension funds were such that we weren't allowed to withdraw - and I'm now very grateful for that. It's just that when you're younger (even in your 50s - in fact that's the time I graduated from Uni and felt so young!) you really don't consider the impact of a low income in the future. Some of my friends who stayed and worked in the UK for more years than I did are now on higher annual incomes. 

I feel fortunate that I have two small private pensions as well as my state pension but wouldn't have had those had it been easy for me to withdraw since I was then, as I am still, unfortunately - a bit of a 'live for now' kind of person. That money would have been long gone. Those pensions are both from public sector jobs. If I had to rely solely on a state pension I'd also be eligible for various benefits but, call me daft, I don't want to have to claim benefits. And I'm not eligible.

You will be so glad you paid into a good pension scheme when you actually reach pension age because my daughter (now aged 44) keeps saying that when she reaches pension age, she doesn't think that there will be such a thing as a state pension. She could be right and that's scary. 

Obviously this is just all my own thoughts and opinions but in your position, I'd really think very carefully before opting out. You're going to want to be able to retire in peace and comfort without money worries . .  I have the benefit of hindsight.

Just a bit of food for thought  All the best to you.