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

Cus

dont_use_vistaprint said:

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

This for me. I pulled out of a DC pension in one job as I needed to pay for the family expenses, pay of credit cards etc. Retirement was a problem for 30 years later in my opinion at the time.  I knew that logically it was not the prudent move but you just persuade yourself that once over the issues then you'll make it up later. I focused on improving earnings, career progression etc as a long term solution.

Roger175

When I was in my teens (late 70's/early 80's), my Mum and Step-Father ran a business which got into trouble. In the end they decided to make a fresh start, downsized and moved a couple of hours away (by then I was 19 and opted to stay living locally). The downsizing process released sufficient money for them to clear most of the debts, but they were still struggling financially. Mum ended up getting a reasonably good senior management position with the NHS, but unknown to me at the time, she opted out of the pension scheme in order to maximise take-home pay. Role-on a few years and they divorced and Mum eventually got herself sorted, but she never opted back into the pension scheme and when she eventually retired after 20-odd years in the job, all she had was her old-style state pension. I only found this out after the event and would have pushed her in a different direction had I known. Very foolish, but there you go, luckily I didn't inherit my Mum's terrible financial judgement - we once has a big disagreement, when she advised me to get the maximum possible mortgage in order to get the maximum tax-relief - go figure!   

EnPointe

Cairnpapple said:

If you're working in casual, short term, or multiple jobs,  then building up lots of tiny pots can just seem like too much hassle.

As someone said above, not thinking you'll live long enough to use it. My grandparents died at 39, 59, 71 and 71 and my mum at 49, so if it wasn't for my dad still alive in his late 70s I wouldn't have a lot of belief in my genetics taking me much past SPA.

given there are a handful of  main players in the  'default auto enrolment '  field  Nest, People's and Now   it's not 'lots of tiny pots'  as  they are quite good at  lumping all your pensions  with  each of them into one fund per provider   

Silvertabby

Roger175 said:

When I was in my teens (late 70's/early 80's), my Mum and Step-Father ran a business which got into trouble. In the end they decided to make a fresh start, downsized and moved a couple of hours away (by then I was 19 and opted to stay living locally). The downsizing process released sufficient money for them to clear most of the debts, but they were still struggling financially. Mum ended up getting a reasonably good senior management position with the NHS, but unknown to me at the time, she opted out of the pension scheme in order to maximise take-home pay. Role-on a few years and they divorced and Mum eventually got herself sorted, but she never opted back into the pension scheme and when she eventually retired after 20-odd years in the job, all she had was her old-style state pension. I only found this out after the event and would have pushed her in a different direction had I known. Very foolish, but there you go, luckily I didn't inherit my Mum's terrible financial judgement - we once has a big disagreement, when she advised me to get the maximum possible mortgage in order to get the maximum tax-relief - go figure!   

My mum and dad were very much 'live for the day and don't give the Government a penny more than you have to' as well.  When I got married in the early 1990s my pre wedding mother-to-daughter speech was on the importance of 'claiming your stamp back, because married women pay less tax' (she meant NI).  When I said that that was no longer an option, she went into a half hour rant about the 'robbing government'.  I didn't bother saying that even if paying the married woman's stamp had still been an option, I would have carried on paying the full whack in order to get my own pension, because she would have never let it go.

She had another fit when we moved from our RAF Married Quarter to our own home in the mid 1990s.  Our mortgage was way more than our (heavily subsidised) married quarter rent, and she just couldn't understand why we hadn't stayed put and 'saved' all that money.  

She's sadly no longer with us, but I could just imagine her carry on if she knew that I had voluntarily paid 'the government' £3K in order to top up my nSP to the full amount!

Blue_Butterfly

In my early nursing career I had some colleagues who had previously worked at a different hospital for a few years. At that time you were able to take out your Superannuation when leaving. Many nurses did this to buy furniture, cars, or just to have some cash. They did re enroll in their new hospital, but when discussing pensions in our 50's they really regretted losing the 3-5 years of service from their pension calculations especially those in senior roles.

incus432

Blue_Butterfly said:

In my early nursing career I had some colleagues who had previously worked at a different hospital for a few years. At that time you were able to take out your Superannuation when leaving. Many nurses did this to buy furniture, cars, or just to have some cash. They did re enroll in their new hospital, but when discussing pensions in our 50's they really regretted losing the 3-5 years of service from their pension calculations especially those in senior roles.

I worked 3 years in the CS but back then (70s) there was no option to keep the pension rights and you had to take the superann payment unless you were moving to another pension scheme (I wasn't) . 

OldBeanz

Roger175 said:

When I was in my teens (late 70's/early 80's), my Mum and Step-Father ran a business which got into trouble. In the end they decided to make a fresh start, downsized and moved a couple of hours away (by then I was 19 and opted to stay living locally). The downsizing process released sufficient money for them to clear most of the debts, but they were still struggling financially. Mum ended up getting a reasonably good senior management position with the NHS, but unknown to me at the time, she opted out of the pension scheme in order to maximise take-home pay. Role-on a few years and they divorced and Mum eventually got herself sorted, but she never opted back into the pension scheme and when she eventually retired after 20-odd years in the job, all she had was her old-style state pension. I only found this out after the event and would have pushed her in a different direction had I known. Very foolish, but there you go, luckily I didn't inherit my Mum's terrible financial judgement - we once has a big disagreement, when she advised me to get the maximum possible mortgage in order to get the maximum tax-relief - go figure!   

Until 2000 you could claim tax relief on your mortgage - MIRAS mortgage interest relief at source.

OldBeanz

incus432 said:

Blue_Butterfly said:

In my early nursing career I had some colleagues who had previously worked at a different hospital for a few years. At that time you were able to take out your Superannuation when leaving. Many nurses did this to buy furniture, cars, or just to have some cash. They did re enroll in their new hospital, but when discussing pensions in our 50's they really regretted losing the 3-5 years of service from their pension calculations especially those in senior roles.

I worked 3 years in the CS but back then (70s) there was no option to keep the pension rights and you had to take the superann payment unless you were moving to another pension scheme (I wasn't) . 

Knew a few folk who joined a different department to get their pension contributions returned.

Silvertabby

Blue_Butterfly said:

In my early nursing career I had some colleagues who had previously worked at a different hospital for a few years. At that time you were able to take out your Superannuation when leaving. Many nurses did this to buy furniture, cars, or just to have some cash. They did re enroll in their new hospital, but when discussing pensions in our 50's they really regretted losing the 3-5 years of service from their pension calculations especially those in senior roles.

Pre 1988 the vesting period was 5 years.  Anyone who left before they had accrued at least 5 years pensionable service had the options of taking a refund of their own contributions, transferring to another scheme, or, if they knew they were going to return to the NHS, leaving their benefits 'frozen' until they returned and rejoined the scheme.  If the NHS was anything like the LGPS then over 90% would have taken the refund option.

Sis-in-law retired as a senior matron equivalent, but in her early days she took almost 5 years worth of refunds when she temporarily left to have her children.  Yes, the refund paid for a pram and other baby stuff - but she still grieves over the pension she 'lost'.

Roger175

OldBeanz said:

Roger175 said:

When I was in my teens (late 70's/early 80's), my Mum and Step-Father ran a business which got into trouble. In the end they decided to make a fresh start, downsized and moved a couple of hours away (by then I was 19 and opted to stay living locally). The downsizing process released sufficient money for them to clear most of the debts, but they were still struggling financially. Mum ended up getting a reasonably good senior management position with the NHS, but unknown to me at the time, she opted out of the pension scheme in order to maximise take-home pay. Role-on a few years and they divorced and Mum eventually got herself sorted, but she never opted back into the pension scheme and when she eventually retired after 20-odd years in the job, all she had was her old-style state pension. I only found this out after the event and would have pushed her in a different direction had I known. Very foolish, but there you go, luckily I didn't inherit my Mum's terrible financial judgement - we once has a big disagreement, when she advised me to get the maximum possible mortgage in order to get the maximum tax-relief - go figure!   

Until 2000 you could claim tax relief on your mortgage - MIRAS mortgage interest relief at source.

I know and did so. The point I was making, was that Mum was saying we should take the biggest possible Mortgage in order to get the maximum amount of tax relief. You only got tax relief on the interest, so she was advising us to pay more interest in order to get more tax-relief. I was just making the point that she wasn't terribly money savvy.