Workplace pension, should I opt in or out?

shiwen55 · 6 April 2018 at 4:10PM

Hi,

You guys have always been helpful, so help me out this time as well, thank you!

I was enrolled into a workplace pension pot automatically (it's law, I think) and now contributions have gone up too much so I cannot afford. Here's what I have been told:

Pension pot and a regular income in retirement is good, if you own your place out right. I have been told if you claim help with your housing needs in retirement, the local authorities would take into consideration you private pension income and they'd deduct that from help you'd get, which means you'd get that from one way, pay out another way.

So... I'm trying to opt out from this as I doubt I would ever be able to own a house nonetheless a tiny flat in my retirement and would probably dependent on state help, so why would I bother? I'd rather to have this money now.

Do you agree? What's your Cons and Pros of having a pension, knowing you'd be on state help in your retirement?

Regards,

shiwen55

PeacefulWaters · 6 April 2018 at 4:14PM

Cut back on other stuff to make sure you can afford it.

Your extra 2% will be added to by a further 1% from your employer, if not more.

Do you want free money or not?

dunstonh · 6 April 2018 at 4:21PM

and now contributions have gone up too much so I cannot afford.

Contributions are only going up a small amount and the employer contribution is going up with it.

If you cannot afford the 2% increase on band earnings then you should look to cut back elsewhere. Especially as the 2% increase is not really 2% (as you get tax relief and possibly a reduction in NI).

I have been told if you claim help with your housing needs in retirement, the local authorities would take into consideration you private pension income and they'd deduct that from help you'd get, which means you'd get that from one way, pay out another way.

Benefits help people on the breadline. If that is where you plan to be in retirement then you will get some help. However, are things really that bad for you and are you really planning to be reliant on charity and benefits in retirement? Even with benefits, you are still talking a very low level of support.

Also, one of the key points of the new single state pension was to remove benefits from people in retirement. We are currently in the phased stage but the expectation is that benefits will be lower in future.

Finally, pension income does not reduce benefits down on a £1 to £1 basis. So, you are not penalised for having personal provision on a like for like basis.

shiwen55 · 6 April 2018 at 4:53PM

dunstonh wrote: »

Contributions are only going up a small amount and the employer contribution is going up with it.

If you cannot afford the 2% increase on band earnings then you should look to cut back elsewhere. Especially as the 2% increase is not really 2% (as you get tax relief and possibly a reduction in NI).

Benefits help people on the breadline. If that is where you plan to be in retirement then you will get some help. However, are things really that bad for you and are you really planning to be reliant on charity and benefits in retirement? Even with benefits, you are still talking a very low level of support.

Also, one of the key points of the new single state pension was to remove benefits from people in retirement. We are currently in the phased stage but the expectation is that benefits will be lower in future.

Finally, pension income does not reduce benefits down on a £1 to £1 basis. So, you are not penalised for having personal provision on a like for like basis.

Still not convincing, I'm afraid.

The fact they'd reduce benefits for pensioners is a different story. They're already living on nothing, let alone take back more from them.

I can understand how difficult is to explain to some what 'poor' is. All dreams, one day when you reach 65, you'd have a lump some!! I bet that wouldn't make any difference then, we need that now.

I don't have to wait for another 25-30 years to get a lump some of maybe 8% contribution currently. I could do more now with that 8%, knowing I can build a better life for myself, than putting somewhere, hoping to get a lump sum at the end. No-one knows what life would be like in 2050 UK!!

Thanks anyway.

shiwen55 · 6 April 2018 at 4:55PM

PeacefulWaters wrote: »

Cut back on other stuff to make sure you can afford it.

Your extra 2% will be added to by a further 1% from your employer, if not more.

Do you want free money or not?

Your reasoning is void, I'm afraid. You are only guessing what cuts I can do or cannot do. Please read my reply to other post, thank you.

dunstonh · 6 April 2018 at 4:56PM

Still not convincing, I'm afraid.

Or perhaps you dont want to be convinced as you have already made your mind up.

The fact they'd reduce benefits for pensioners is a different story. They're already living on nothing, let alone take back more from them.

I suggest you read up about the reasons to the move to the single state pension if you dont believe it.

No-one knows what life would be like in 2050 UK!!

True. However, you pretty much know that it is not going to be any fun if you have no personal provision and you are going to rely on the state.

shiwen55 · 6 April 2018 at 5:05PM

dunstonh wrote: »

Or perhaps you dont want to be convinced as you have already made your mind up.

After reading your comments, yes I made up my mind!!

Thank you for your time.

And in 2050, I bet things will get worse than now, but I won't be alone, millions will be like our family. I bet that famous lump sum would not even get us a pint of milk !!!

Prism · 6 April 2018 at 5:26PM

shiwen55 wrote: »

After reading your comments, yes I made up my mind!!

Thank you for your time.

And in 2050, I bet things will get worse than now, but I won't be alone, millions will be like our family. I bet that famous lump sum would not even get us a pint of milk !!!

If things ever change for you I would revisit the idea of a pension as it really is a good way to say for later years. You never know, you have 30 years and as you say things could be very different

Oliver1191 · 6 April 2018 at 5:33PM

I understand where you're coming from.

Being on a low income, with little wealth behind you (principally not owning your own home), sucks. It's hard to take advantage of opportunities as you simply don't have much money spare. You probably feel like you're breaking even.

And, let's be honest, if you've never been in that position, you'll never understand what it is like.

Despite this, though, I would strongly suggest that you re-consider your position.

When I was on really low pay (about £800 a month take-home around 13 years ago), it felt really hard. I was working for a company that didn't provide a pension. At the time, I would have thought that I could not have afforded it.

But now at the age of 35, I really regret not having pension contributions for those early years of my life.

At the age of 23 I moved jobs and started working on the same low pay of £800 take-home. This time, I was working in the public sector. I decided to join the Local Government Pension Scheme. I think my contributions were about £60 before tax, but it might have been less - it was a long time ago.

I didn't really notice much difference - I was still short on cash. I got by, but it sucked that it felt like I couldn't buy anything. Like you it felt rubbish that I coulnd't buy a home.

But, after 2 years I was able to use the experience and skills i'd gained to apply for a better job. This job earned me more money.

So, move forward to today, I have a LGPS that is worth £400 a year from the age of 60. This is great. It wont solve all my needs, but it's a good start and it's fixed in real terms (so goes up with the rate of inflation).

When I got that other job, I started a private pension. Often I could only afford to put £50, 20 or even just £10 a month into that pension. For a long time, I could not afford to contribute. Today, that pension is worth 14k. This was another great move - I can take it from 58. I still have years to contribute to build it up. I'm so glad I started this.

I also became a teacher, so joined the Teachers' Pension scheme - i've been in that for about 10 years. It's now worth around 9k a year from the age of 68. Again, it wont solve all my needs, but it's a massive step in the right direction.

You don't know what your future holds. Most likely this pension will grow well over time.

Your circumstances might change for the better. You might be able to contribute more or start up other financial options (e.g. LISAs and ISAS).

Find a way to pay the extra bit of cash - it might be as little as £10 - 30 in reality. Don't forget that you'll get tax relief. And, small amounts really do build up into big piles if invested well.

You will come to regret it if you don't give yourself some security for the future.

cloud_dog · 6 April 2018 at 5:43PM

shiwen55 wrote: »

After reading your comments, yes I made up my mind!!

Thank you for your time.

And in 2050, I bet things will get worse than now, but I won't be alone, millions will be like our family. I bet that famous lump sum would not even get us a pint of milk !!!

This is the reason why people use money today to invest for the future. Generally (because investments go in cycles of growth and retrace), investments keep up with and usually far outpace inflation; they are assets and the impact of inflation on money has the opposite effect on assets, to actually inflate / increase the monetary value of assets. Houses are another form of assets.

So your 49p today (to buy a pint of milk) invested is likely to produce more than the pint of milk in 30 years time. i.e. a pint of milk will be (approx) £1.50 in 2048 money. Your 2018 49p may result in being worth £3 in 2048 money.

If you don't do it today you will regret it tomorrow.

Brynsam · 6 April 2018 at 5:46PM

Good luck in 20 years time when there are no state benefits....

Workplace pension, should I opt in or out?

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