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Why would someone want to opt out from a pension scheme?

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  • GunJack
    GunJack Posts: 11,837 Forumite
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    Probably worth pointing out as I do not think anyone has specifically mentioned it yet, is that some ( mainly larger) private sector employers actually pay more than the minimum required . I think that a contribution of up to 10% is not that uncommon ( sometimes linked to you adding more, but not always) .
    So by opting out in this situation you are losing out on even more free money.
    Indeed, only this year our company closed the db care scheme for a DC one, employee conts 8%, company 15%, and with an extra one off compensation of 15% into our pot to get us starting off on a good footing...
    ......Gettin' There, Wherever There is......

    I have a dodgy "i" key, so ignore spelling errors due to "i" issues, ...I blame Apple :D
  • I opted out of my pension scheme for one month, and then rejoined. this preserved my previous service when i was acting up as my final salary.
  • Albermarle
    Albermarle Posts: 27,909 Forumite
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    GunJack said:
    Probably worth pointing out as I do not think anyone has specifically mentioned it yet, is that some ( mainly larger) private sector employers actually pay more than the minimum required . I think that a contribution of up to 10% is not that uncommon ( sometimes linked to you adding more, but not always) .
    So by opting out in this situation you are losing out on even more free money.
    Indeed, only this year our company closed the db care scheme for a DC one, employee conts 8%, company 15%, and with an extra one off compensation of 15% into our pot to get us starting off on a good footing...
    I think that is often the case where a DB pension is closed, the employer is more generous than legally necessary to the new DC scheme to ease the transition.
    However 15% is certainly on the high side !
  • dont_use_vistaprint
    dont_use_vistaprint Posts: 784 Forumite
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    edited 30 December 2024 at 11:47AM
    Emmia said:
    JohnBravo said:
    Hi,
    Why would someone want to opt out from a pension scheme?
    When you opt out you lose 1% from the government and 3% from the employer, right?


    Because they want their pension contributions in their pocket, for spending in the here and now 


    It's a really short sighted approach, but I can see that if you're young or in a situation with pressure on the household budget it is a tempting choice.
    Absolutely  agree, if you’re young, single earner, kids, debts you’re trying to pay off ,last thing on your list of priorities is saving money for when you’re in your 60s. in fact, I’d go as far to say it’s bloody selfish.

    it might be shortsighted but it’s financial good sense to try and pay off debts before saving


    The greatest prediction of your future is your daily actions.
  • kinger101
    kinger101 Posts: 6,573 Forumite
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    edited 30 December 2024 at 12:03PM
    Emmia said:
    JohnBravo said:
    Hi,
    Why would someone want to opt out from a pension scheme?
    When you opt out you lose 1% from the government and 3% from the employer, right?


    Because they want their pension contributions in their pocket, for spending in the here and now 


    It's a really short sighted approach, but I can see that if you're young or in a situation with pressure on the household budget it is a tempting choice.
    Absolutely  agree, if you’re young, single earner, kids, debts you’re trying to pay off ,last thing on your list of priorities is saving money for when you’re in your 60s. in fact, I’d go as far to say it’s bloody selfish.

    it might be shortsighted but it’s financial good sense to try and pay off debts before saving


    It makes sense if you're a step away from a CCJ.

    It makes no sense if you have a couple of grand on a 0 percent balance transfer and you are giving up a 2:1 employer match.

    Or you are making mortgage overpayments but  are in the 60 PC marginal tax bracket.

    Everything depends on individual circumstances but there are many examples where debt and retirement saving can rationally  co-exist.
    "Real knowledge is to know the extent of one's ignorance" - Confucius
  • Emmia
    Emmia Posts: 5,668 Forumite
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    Emmia said:
    JohnBravo said:
    Hi,
    Why would someone want to opt out from a pension scheme?
    When you opt out you lose 1% from the government and 3% from the employer, right?


    Because they want their pension contributions in their pocket, for spending in the here and now 


    It's a really short sighted approach, but I can see that if you're young or in a situation with pressure on the household budget it is a tempting choice.
    Absolutely  agree, if you’re young, single earner, kids, debts you’re trying to pay off ,last thing on your list of priorities is saving money for when you’re in your 60s. in fact, I’d go as far to say it’s bloody selfish.

    it might be shortsighted but it’s financial good sense to try and pay off debts before saving


    In the CS some are opting out of a fantastic pension to boost take home

    https://www.telegraph.co.uk/money/pensions/thousands-civil-servants-throwing-away-gold-plated-pensions/
  • Too many people can only see short term gains, they are unable to delay gratification, they see a tiny boost in income now as better than something in the future because they lack the mental capacity to effectively evaluate the abstract concept of future wellbeing. 
  • Too many people can only see short term gains, they are unable to delay gratification, they see a tiny boost in income now as better than something in the future because they lack the mental capacity to effectively evaluate the abstract concept of future wellbeing. 
    And with the civil service scheme the Telegraph article is doubtless referring to, the vast majority of those opting out will be paying more tax for the privilege of opting out!
  • Cobbler_tone
    Cobbler_tone Posts: 1,037 Forumite
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    edited 30 December 2024 at 12:44PM
    When our DB closed in 2021 I calculated the ‘loss’ of around £300k between the ages of 52-65, not that I’m working to 65. Their contributions were equivalent to 48% of my wage. They paid £20k transition payment and now do double match to 12% max. I do 25%, so 37% total.
    I see being in a company scheme (with company contributions) a no brainer, although I am sure so are on the breadline from a net affordability perspective.

    They closed it to new members in 2010, so I always saw the last ten years as a bonus.

    Our minimum wage is around £30k to give the option of 6% pension, share scheme and healthcare, whilst remaining above the NMW.
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