Am I missing something?

mywhittlefriend · 9 April 2019 at 10:52AM

Dear All,
After being self employed for 14 years due I had a change in personal circumstances and had to restart my life from scratch. I am 53 yrs old and 18 months ago got myself a "proper job", employed full time permanent. Upon joining the company I immediately opted out of the pension scheme. I have now been made aware of auto-enrolment and my pay will be 10% smaller next month. For someone that plans their money to the penny every month, this is not good news. It is my choice what I do with my money without the government deciding what it thinks best for me. I read the article regarding auto-enrolment and struggle to see how this can be considered a pay rise. Why is auto-enrolment such a good idea? I have a private pension pot with about £130,000 in it. When I retire I will probably get £500 a year from an annuity (if I am lucky). therefore I will be taking that money out as soon as I can get my hands on it. Bearing in mind the shocking annuity rates, the fact that you can't touch your money until you are 55 and the risk (albeit small) involved - why would anyone invest in a pension? What am I missing?
The only benefits I can see are for the pension providers and the government who will have phased out the state pension by the time I retire - which I am highly unlikely to be able to do.
Apologies for the rant and thanks for reading.

Paul_Herring · 9 April 2019 at 12:57PM

why would anyone invest in a pension?

So you won't miss the 3% of your salary your employer would otherwise be adding in there, which you won't get otherwise.

Or the tax rebate on your contributions.

the fact that you can't touch your money until you are 55

Which, by your own admission is less than 2 years away.

However...

Upon joining the company I immediately opted out of the pension scheme.

I have now been made aware of auto-enrolment and my pay will be 10% smaller next month

You've either
- not opted out of auto-enrolment,
- opted out and it hasn't happened for some reason, or
- you've misinterpreted something that you're blaming on auto-enrolment.

I'm also wondering how a 5% contribution before tax would result in an after-tax reduction of 10%.

dunstonh · 17 April 2019 at 9:21PM

This forum is a ghost town. You would have got more responses in the main pension section. However, Paul_Herring covered most of it.

Upon joining the company I immediately opted out of the pension scheme.

A decision that is likely to be wrong for 99 out 100 people.

I have now been made aware of auto-enrolment and my pay will be 10% smaller next month.

The AE rate is not 10%. So, if your scheme is taking 10% from you then chances are the contribution from the employer is going to be very high or perhaps it is a defined benefit scheme (which is better still).

I read the article regarding auto-enrolment and struggle to see how this can be considered a pay rise. Why is auto-enrolment such a good idea?

Free money from the employer. Tax relief and tax free growth from the Government.

I have a private pension pot with about £130,000 in it. When I retire I will probably get £500 a year from an annuity (if I am lucky).

That is just being silly and totally unhelpful. That £130k could produce £6500 a year even if it was not going to grow another penny. You can access that money as well for ad-hoc lump sums. Nothing like the £500 a year you mention.

the fact that you can't touch your money until you are 55

It is a pension after all.

why would anyone invest in a pension? What am I missing?

You are missing a lot. Mostly free money.

No alternative option will provide anywhere near as much as the pension will.

who will have phased out the state pension by the time I retire

Again, you are being silly.

Apologies for the rant and thanks for reading.

Yes it was a rant and like most rants it is based on false information and bad understanding. Take a few minutes to understand what it is and you will see that you are being very very silly by opting out. You could be missing out on tens or even hundreds of thousands of pounds over your retirement years.

Brilley · 18 April 2019 at 10:01PM

....opting out of a pension and free money.....sounds a little silly to me, unless you are you independently wealthy, or want to work forever ?????

MEM62 · 9 May 2019 at 3:55PM

mywhittlefriend wrote: »

It is my choice what I do with my money without the government deciding what it thinks best for me.

Morally, I would agree with you. But if you insist on making poor decisions that will leave you in poverty in retirement the Government (i.e. the working taxpayers) will have to support you. It is therefore understandable that the Government encourages you to make provision for yourself for the day when you are no longer able to, or wish to, work.

mywhittlefriend wrote: »

therefore I will be taking that money out as soon as I can get my hands on it.

And once you have blown that what are you planning to live on? Particularly as you are convinced that there will be no state pension by that stage.

AnotherJoe · 13 May 2019 at 8:15PM

OP your rant is so Ill informed, incorrect and Illogical it's hard to believe you are serious.
If you perform in your new job on a similar basis to your reasoning here, you wont be working for very long to pay in those pension payments.
Got to wonder though since you are so set on the iniquity of government taking your money via pension (which of course they aren't,they are giving you extra money) why on earth you would take it all asap and give government a huge whack of tax !

Am I missing something?

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