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Opting Out

I am currently enrolled in my employer's pension scheme and also have an additional personal pension with a different pension provider. I contribute 5% to my employer's pension scheme, as does my employer. I would much rather everything be paid into my personal pension as I have more flexibility and lower fees, but this is not something my employer currently allows.

I am about to enter into salary negotiations and was wondering if it would be possible to agree a salary increase of, say, 10%, on the agreement that I opt out of my employers pension scheme. This would cost my employer slightly more in NI contributions, but would mean I could contribute entirely to my personal pension.

Before auto-enrolment, I don't think this would have been a problem, but I wonder whether my employer would be breaking the law by not directly contributing into a pension for me?

Any advice would be appreciated!

Comments

  • If you're opting out, then they won't be breaking the law.


    And to get the same benefit, you're probably going to need more than 10% gross to fund your other pension (Doubly so if your current work scheme is salary sacrifice due to NI savings.)

    Can't you simply transfer funds from work scheme to personal scheme? (Either once a month/once a year/whatever.)
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  • dunstonh
    dunstonh Posts: 116,034
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    I am about to enter into salary negotiations and was wondering if it would be possible to agree a salary increase of, say, 10%, on the agreement that I opt out of my employers pension scheme.

    That would be a breach of auto-enrolment rules. As you say, not an issue in the past but is an issue now. If they offered you a higher salary and made it contractrual, you could then opt back in and they would have to accept that. They cant be seen to bribe you for opting out.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • If you're opting out, then they won't be breaking the law.


    And to get the same benefit, you're probably going to need more than 10% gross to fund your other pension (Doubly so if your current work scheme is salary sacrifice due to NI savings.)

    Can't you simply transfer funds from work scheme to personal scheme? (Either once a month/once a year/whatever.)

    I could transfer, but there are costs involved in doing so and doing it on a regular basis would likely cost more than the benefits of moving it.
    dunstonh wrote: »
    That would be a breach of auto-enrolment rules. As you say, not an issue in the past but is an issue now. If they offered you a higher salary and made it contractual, you could then opt back in and they would have to accept that.

    Thanks, I thought that might be the case. I'll raise the possibility of paying into my personal pension at the salary review and see what their view is. The ongoing management fees on my personal pension are roughly .5% lower as I have other investments with them, so there's a very tangible benefit for me!
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