Opt-out workplace pension

Matt_uk · 5 April 2019 at 8:39AM

Hi all. Since the workplace pension contribution is goi up to 5% I've told my manager I want to opt out. When it was 3% it was already too expensive.
I work 42 hours per week, and earn £8.43 per hour as a cleaner. I've already got an attachment order on my wages of £60 for the next 12 months to pay back HMRC since they overpaid me working tax credit 3 years ago. I figured when I hit retirement age I figured I'll claim state pension and work part time doing a cleaning job and housing benefit and council tax benefit. Why isn't this a good idea?

Spreadsheetman · 5 April 2019 at 8:48AM

Many reasons, but I'll open the batting with: You are saying no to free money from the employer's 3% contribution.

crv1963 · 5 April 2019 at 9:03AM

Bad idea! This is because-

1) As Spreadsheetman says you are turning down free money from your employer. How would you feel if they said they were cutting your wage by 3%? That's what you are doing to yourself.

2) Do you really want to work part time forever? At some point this will become impossible.

3) Every little bit of extra income when you retire is helpful, even if your amount saved is not massive the money is still yours and could pay for something.

4) I calculate at £8.43 ph you are saving 67p ph with your employer contribution so £28.32 pw so £1,472.88 pa.

Saving nearly 1500 per year for however long you have before retirement is likely to make a big difference to you in the future.

I'd opt back in, view it for what it is- your future self fund.

Paul_Herring · 5 April 2019 at 9:31AM

4) I calculate at £8.43 ph you are saving 67p ph with your employer contribution so £28.32 pw so £1,472.88 pa.

Is that presuming 'total pay' is used in the calculation, or just the minimum required of 'pensionable earnings'?

MEM62 · 5 April 2019 at 10:00AM

Matt_uk wrote: »

Why isn't this a good idea?

There are many reasons, I'll give you three;

* Because if you cannot live on the £350 a week that you earn now how do you expect to live on circa £144 quid a week in retirement?

* Cleaning in a physical occupation, there will come a time when you either cannot do it or no longer wish to do it.

* By withdrawing from your employer's scheme you are giving up free money. Look at it this way, with 3% & 5% contributions respectively, your employer is paying for 37% of your retirement fund.

crv1963 · 5 April 2019 at 10:02AM

Paul_Herring wrote: »

Is that presuming 'total pay' is used in the calculation, or just the minimum required of 'pensionable earnings'?

I assumed total pay. But I still advocate any savings that employer pays towards is better than none.

dunstonh · 5 April 2019 at 11:18AM

£8.43 x 42 hours is £354.06 a week
Employer pays £10.62 a week to the pension
Employee pays £17.70 gross but gets tax relief meaning its only costing £14.16 a week.

So, actually, the net contribution is just 3.7% a week.

At a cost of £736.32 a year or just £61.36pm, you get £1472.64 a year added to the pension.

By opting out, you are throwing that free money away.

That free money from the employer and Government is the equivalent of just over 87 hours worth of work to you. And you wish to throw it away as you say you cannot afford to place £14.16 a week of the £354 you earn into it.

I suggest you look at other things you pay and check your priorities to make yourself able to afford it.

Matt_uk · 5 April 2019 at 11:32AM

To be honest I'd pay into the workplace pension but after tax and national insurance, paying my rent, council tax, wifi, phone credit, electric and paying people back money I've borrowed I end up with about £400 for 4 weeks to live on, plus I've got a dea from HMRC so it's gonna be less than £400 now. Plus I'm an alcoholic so at least £6 a day is going on alcohol, also my bus fares and food at work. Vape liquid. Really that £25 or so quid that's deducted for a pension each month, I could do with it in my bank account. My state pension forecast is £165 a week (something like that) so I figured as it's low I'd get housing benefit and council tax benefit when I'm retired. So that £165 a week is cash in my pocket. I'd just have to pay internet and phone credit and electric bills. I don't have any kids and I live alone. More than likely it'll stay that way the rest of my life as well.

Username3456 · 5 April 2019 at 11:37AM

Some people can't be convinced no matter how much you try

dunstonh · 5 April 2019 at 11:39AM

I'd just have to pay internet and phone credit and electric bills.

Don't forget your alcohol and vaping.

crv1963 · 5 April 2019 at 11:43AM

Thank you for your honesty.

People and circumstances can change. I suggest that you seek help for your alcoholism. It is a field I have some experience with- it is a hard and at times difficult journey but one possible. There are services which can and do help, you have reached the first point by recognising that you have a problem.

Do not rely on the benefits system being as it is now in the future this could all change. Could you ask the HMRC to lower the payments over a longer time period?

You don't say your age but everyones life changes over time, don't handicap your future self for £25 pm now.

Opt-out workplace pension

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