Opting out

The_pc_tech · 3 February 2013 at 7:22PM

My sincere apologies as this has probably been asked before.

As soon as my current job became stable (contract changed from fixed term to indefinite/permanent) I set up a stakeholder pension with Scottish Widows which I have paid into every month for the past 8 years.

I had an appointment with an IFA about 18 months ago who looked over the pension for me and he made enquires with Scottish Widows came back to tell me that the fund was doing rather well even considering the economic situation (I understood they were known for financial stability which is why I chose them as well as being linked to Lloyds who my parents have banked with for years)

Also a couple of years ago I had to take a pay cut to keep my job.

I understand I am due to be automatically enrolled into my employer's pension scheme from March.

I did contact our Pensions Manager to explain I wanted to opt out and he explained it would be illegal for them to do this until they opted people in.

So how do I opt out before they deduct money from my salary or is it a case of just having to claim it back?

GhIFA · 3 February 2013 at 8:51PM

The simple answer is you can't. It is not possible to opt out before you are auto-enrolled. You have to wait until it is done. Your employer also won't be able to supply with you the form you will need to opt out, you will need to approach the provider directly. Therefore, there will be deduction of contribution from your salary, which will then need to be refunded to you when your opt out has been actioned.

However, one thing to bear in mind - whilst it is good to be contributing to your Stakeholder plan, opting out of your employer's scheme will also mean you are losing the benefit of their contribution. I don't know what level of contributions you are currently making, or what basis the employer scheme is being run on, but it may make sense to reduce the contributions to your personal scheme by the minimum amount required for your employer scheme, and pay them into that scheme instead in order to get the benefit of the contributions they will make, if this affordable for you.

dunstonh · 3 February 2013 at 9:12PM

Why would you want to opt out? You would be turning down the employer contribution which is effectively free money. Your existing pension cannot compete with free money.

The_pc_tech · 3 February 2013 at 9:40PM

Firstly, thank you both for taking the time to reply

I had to take a rather large cut to hold onto my job,

Absolutely no information has been circulated about how my employer is going to implement this nor was there anything on our staff intranet last time I checked about a week ago so I have absolutely no idea how much they are going to deduct from my salary come March.

If they decide to take a couple of hundred quid then I will be going into my overdraft to meet my commitments for the month and this is a situation I don't want to get into again.

While the intentions are on the face of it are well meaning (and from the Government's point of view it'll shift some of the responsibility onto someone else) it's been executed as a tax and I expect many employers will cut salaries so it does not cost them any more in real terms.

If you are on a below average salary a deduction is a deduction, no matter how you spin it.

Is this really progress?

dunstonh · 4 February 2013 at 9:38AM

and from the Government's point of view it'll shift some of the responsibility onto someone else

As the consumer has shown they cannot take responsibility, then it makes sense to shift it from them.

it's been executed as a tax and I expect many employers will cut salaries so it does not cost them any more in real terms.

Its been coming for over 5 years. Employers have known about it and planned for it well in advance. Some could very well have factored pay rises over that period to price in the cost of employer contributions.

If you are on a below average salary a deduction is a deduction, no matter how you spin it.

Is this really progress?

The alternative is no pension in retirement and you getting £7400 a year income to live on (assuming full state pension qualification).

jamesd · 4 February 2013 at 12:27PM

The_pc_tech wrote: »

I understand I am due to be automatically enrolled into my employer's pension scheme from March. I did contact our Pensions Manager to explain I wanted to opt out and he explained it would be illegal for them to do this until they opted people in. So how do I opt out before they deduct money from my salary or is it a case of just having to claim it back?

He's right. The rules were written to make it harder for employers to discourage employees from opting out. They even have to re-join you every three years if you opt out now.

Do the opting out as soon as you're signed up and the money should be returned to you. There's a time limit for this refund and the notification of joining will tell you that time limit.

atush · 4 February 2013 at 5:33PM

Wait and see how much the employer will put in before you decide. It really is foolish to contribute to a pensions yourself, over tkaing up ine with employers 'free' contributions.

So, if you reduce your payments into your personal pension accordingly, then you won't take home any less than now and won't need to use the overdraft.

The_pc_tech · 4 February 2013 at 10:10PM

Thanks all.

Some info has gone up on our intranet but I've been so busy today I've not had chance to read it.

smerch1468 · 29 March 2013 at 10:18AM

The_pc_tech wrote: »

Thanks all.

Some info has gone up on our intranet but I've been so busy today I've not had chance to read it.

It is actually a legal requirement to communicate how the scheme will operate including the contributions you will pay in personally. I assume that your employer is working with an IFA or Employee Benefits Consultancy.

Auto enrolment is not a straight forward process, it can take up to 18 months to go through all the steps to ensure your Workplace Pension Scheme meets the new requirements. Failure to do so will result in fines for your employer, even imprisonment for senior directors if they continually fail to meet their obligations.

As the other contributors have mentioned, you shouldn't be turning down free money from your employer just to maintain your stakeholder pension. In anycase, if you decide to leave your employer you can always transfer the built up fund into your stakeholder pension.

stinktankcynic · 29 March 2013 at 10:15PM

smerch1468 wrote: »

It is actually a legal requirement to communicate how the scheme will operate including the contributions you will pay in personally. I assume that your employer is working with an IFA or Employee Benefits Consultancy.

Auto enrolment is not a straight forward process, it can take up to 18 months to go through all the steps to ensure your Workplace Pension Scheme meets the new requirements. Failure to do so will result in fines for your employer, even imprisonment for senior directors if they continually fail to meet their obligations.

As the other contributors have mentioned, you shouldn't be turning down free money from your employer just to maintain your stakeholder pension. In anycase, if you decide to leave your employer you can always transfer the built up fund into your stakeholder pension.

I thought you could not transfer out of NEST?

smerch1468 · 31 March 2013 at 6:15PM

stinktankcynic wrote: »

I thought you could not transfer out of NEST?

Not all qualifying workplace pension schemes are NESTs. The OPs employer may be using an existing pension scheme set up with a pension provider or setting up a new plan.

All pension providers have the facility to offer compliant pension schemes under the new legislation. NESTs are aimed at low to middle earners and may not be suitable for say higher rate taxpayers.

Opting out

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