Workplace Pension?

trev2014

Several years back, a financial advisor (a friend of a friend) helped me set up a private pension. However, he's since retired and I haven't been in touch with him for a long time. At that point, I was advised to opt out of the workplace pension. Even though I've received several pay raises over the years, I haven't increased my contributions, which means my employer's contributions haven't gone up either. Since my employer will match my contributions (up to 5%), I'm looking to increase my pension payments. Currently, it looks like I'm paying a few thousand in fees each year on my private pension. I also just received an email notifying me that I've been automatically enrolled back into the workplace pension scheme, and I'll need to opt out again if I choose to. I understand this isn't a lot of information, but should I continue with increased payments into my current private pension, or would it be wiser to contribute 5% to the workplace pension and stop further payments into my private pension? From what I've gathered, workplace pensions tend to be lower risks and lower fees.

Dazed_and_C0nfused

trev2014 said:

Several years back, a financial advisor (a friend of a friend) helped me set up a private pension. However, he's since retired and I haven't been in touch with him for a long time. At that point, I was advised to opt out of the workplace pension. Even though I've received several pay raises over the years, I haven't increased my contributions, which means my employer's contributions haven't gone up either. Since my employer will match my contributions (up to 5%), I'm looking to increase my pension payments. Currently, it looks like I'm paying a few thousand in fees each year on my private pension. I also just received an email notifying me that I've been automatically enrolled back into the workplace pension scheme, and I'll need to opt out again if I choose to. I understand this isn't a lot of information, but should I continue with increased payments into my current private pension, or would it be wiser to contribute 5% to the workplace pension and stop further payments into my private pension? From what I've gathered, workplace pensions tend to be lower risks and lower fees.

Can you clarify, do you mean your employer is contributing to your workplace pension even though you opted out of having a workplace pension 🤔

That would be relatively unusual.

If your private pension is worth say £500,000 then paying a few thousand doesn't seem unreasonable.  If it's worth £50,000 then you are possibly seeing one of the issues with using a financial adviser, instead of an independent financial advisor.

Albermarle

Can you confirm that a financial advisor actually advised you to opt out of a workplace pension and give up employer contributions?
That would be pretty mad .
Are you still paying financial advisor fees on your private pension. If so, to who ?

Seperately risk is entirely dependent on the investments held within a pension. The fact that is a workplace one or not is irrelevant.
In any case in many circumstances, higher risk can bring higher growth in the long run, so can be a good thing.

dunstonh

. At that point, I was advised to opt out of the workplace pension. 

It is not uncommon (especially for directors or higher earners) to opt out of the workplace pension and have the employer contribute the same amount into an individual pension.   It is unusual for normal employees.   However, the contributions that would have gone into the workplace pension should up updated to go into the individual pension.  

 Currently, it looks like I'm paying a few thousand in fees each year on my private pension

All investments operate on an explicit charge basis (unlike savings accounts where it is an implicit charge).   

 but should I continue with increased payments into my current private pension, or would it be wiser to contribute 5% to the workplace pension and stop further payments into my private pension

Seeing as you haven't updated the contributions over the years, I would opt in as you are missing out on free money.  That is unless you intend to get it right going forward.

From what I've gathered, workplace pensions tend to be lower risks and lower fees.

Wrong on both counts.   Risks depend on your choices and individual schemes tend to have more choice (e.g. whole of market) vs workplace pensions that may only have 10-100 choices.  Workplace pensions have a cap on charges at 0.75% for the default investment funds. Charges can be lower.  Especially for larger employers.   Whereas individual pensions have no cap on charges but can be lower (e.g. around 0.3x% p.a)

trev2014

Thanks all for the feedback. Both myself and employer are currently contributing into my individual pension, albeit only around the 2-3% mark. My individual pension is currently valued around the £100k mark. There's nothing in my workplace pension as i opted out of it three years ago. I've just been automatically enrolled back into the workplace pension (like all other employees). I can either opt out again and continue adding to my individual pension (at 5%) or start putting funds into the workplace pension and ask my employer to match and contribute to this one.    

Marcon

trev2014 said:

Thanks all for the feedback. Both myself and employer are currently contributing into my individual pension, albeit only around the 2-3% mark. My individual pension is currently valued around the £100k mark. There's nothing in my workplace pension as i opted out of it three years ago. I've just been automatically enrolled back into the workplace pension (like all other employees). I can either opt out again and continue adding to my individual pension (at 5%) or start putting funds into the workplace pension and ask my employer to match and contribute to this one.    

Which route will get you a bigger employer contribution?

Your adviser recommended that you set up a private pension rather than joining the workplace scheme (and the employer was willing to contribute to that private pension instead of the workplace scheme, which is highly unusual). What has changed to make you think stopping contributions to your private pension and joining the workplace scheme instead would be a good idea?

Marcon

dunstonh said:

. At that point, I was advised to opt out of the workplace pension. 

It is not uncommon (especially for directors or higher earners) to opt out of the workplace pension and have the employer contribute the same amount into an individual pension.   It is unusual for normal employees.   However, the contributions that would have gone into the workplace pension should up updated to go into the individual pension.  

Depends what was agreed. I've seen a case where the employer agreed to the increased hassle of paying into a different pension scheme on the basis that they would only pay a certain fixed amount. If that's what has happened here, OP may need to join the workplace scheme to get an employer contribution based on their current/future salary.

dunstonh

Marcon said:

dunstonh said:

. At that point, I was advised to opt out of the workplace pension. 

It is not uncommon (especially for directors or higher earners) to opt out of the workplace pension and have the employer contribute the same amount into an individual pension.   It is unusual for normal employees.   However, the contributions that would have gone into the workplace pension should up updated to go into the individual pension.  

Depends what was agreed. I've seen a case where the employer agreed to the increased hassle of paying into a different pension scheme on the basis that they would only pay a certain fixed amount. If that's what has happened here, OP may need to join the workplace scheme to get an employer contribution based on their current/future salary.

The only ones I have seen have been management/director level, who don't want to be in the basic AE scheme.   As they are the decision makers, they can do what they like and in each case, the annual increases were applied to the individual scheme but often needed adjustments as the months where changes were made didn't match.   It's one of those things that you need to be on the ball with.

I haven't seen it with normal employees, although I am sure it does happen as you say.

poseidon1

dunstonh said:

Marcon said:

dunstonh said:

. At that point, I was advised to opt out of the workplace pension. 

It is not uncommon (especially for directors or higher earners) to opt out of the workplace pension and have the employer contribute the same amount into an individual pension.   It is unusual for normal employees.   However, the contributions that would have gone into the workplace pension should up updated to go into the individual pension.  

Depends what was agreed. I've seen a case where the employer agreed to the increased hassle of paying into a different pension scheme on the basis that they would only pay a certain fixed amount. If that's what has happened here, OP may need to join the workplace scheme to get an employer contribution based on their current/future salary.

The only ones I have seen have been management/director level, who don't want to be in the basic AE scheme.   As they are the decision makers, they can do what they like and in each case, the annual increases were applied to the individual scheme but often needed adjustments as the months where changes were made didn't match.   It's one of those things that you need to be on the ball with.

I haven't seen it with normal employees, although I am sure it does happen as you say.

Agree, this is what happened in my case.

 I did not like my employers SWID offering to staff, and I already had an HL Sipp of my own.  As a senior manager they not only agreed to pay employers contributions straight to my Sipp, but when I also later elected to salary sacrifice, they also credited my Sipp with their employer's NI savings in addition to their contribution. Payroll dept had to make adjustments to accommodate my specific arrangement.

Marcon

poseidon1 said:

dunstonh said:

Marcon said:

dunstonh said:

. At that point, I was advised to opt out of the workplace pension. 

It is not uncommon (especially for directors or higher earners) to opt out of the workplace pension and have the employer contribute the same amount into an individual pension.   It is unusual for normal employees.   However, the contributions that would have gone into the workplace pension should up updated to go into the individual pension.  

Depends what was agreed. I've seen a case where the employer agreed to the increased hassle of paying into a different pension scheme on the basis that they would only pay a certain fixed amount. If that's what has happened here, OP may need to join the workplace scheme to get an employer contribution based on their current/future salary.

The only ones I have seen have been management/director level, who don't want to be in the basic AE scheme.   As they are the decision makers, they can do what they like and in each case, the annual increases were applied to the individual scheme but often needed adjustments as the months where changes were made didn't match.   It's one of those things that you need to be on the ball with.

I haven't seen it with normal employees, although I am sure it does happen as you say.

Agree, this is what happened in my case.

 I did not like my employers SWID offering to staff, and I already had an HL Sipp of my own.  As a senior manager they not only agreed to pay employers contributions straight to my Sipp, but when I also later elected to salary sacrifice, they also credited my Sipp with their employer's NI savings in addition to their contribution. Payroll dept had to make adjustments to accommodate my specific arrangement.

Spoiler alert for other readers: this is the exception, not the rule...

poseidon1

Marcon said:

poseidon1 said:

dunstonh said:

Marcon said:

dunstonh said:

. At that point, I was advised to opt out of the workplace pension. 

It is not uncommon (especially for directors or higher earners) to opt out of the workplace pension and have the employer contribute the same amount into an individual pension.   It is unusual for normal employees.   However, the contributions that would have gone into the workplace pension should up updated to go into the individual pension.  

Depends what was agreed. I've seen a case where the employer agreed to the increased hassle of paying into a different pension scheme on the basis that they would only pay a certain fixed amount. If that's what has happened here, OP may need to join the workplace scheme to get an employer contribution based on their current/future salary.

The only ones I have seen have been management/director level, who don't want to be in the basic AE scheme.   As they are the decision makers, they can do what they like and in each case, the annual increases were applied to the individual scheme but often needed adjustments as the months where changes were made didn't match.   It's one of those things that you need to be on the ball with.

I haven't seen it with normal employees, although I am sure it does happen as you say.

Agree, this is what happened in my case.

 I did not like my employers SWID offering to staff, and I already had an HL Sipp of my own.  As a senior manager they not only agreed to pay employers contributions straight to my Sipp, but when I also later elected to salary sacrifice, they also credited my Sipp with their employer's NI savings in addition to their contribution. Payroll dept had to make adjustments to accommodate my specific arrangement.

Spoiler alert for other readers: this is the exception, not the rule...

Very much the exception - it was part of an inducement  to get me to remain with the firm!