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Should I Opt Out Of My Work Pension?

by Louise W. Rice
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An interesting question. As a young man, I was proud to earn my salary for the first time, but I also resented that so much of my hard-earned cash just seemed to be disappearing before I even received it. Retirement seemed a very distant land, so saving for those years seemed a little bit of a waste when I could spend it on a nice blue car instead.

In the end, I did opt out of my pension, and I have regretted it ever since. As I approach retirement, I have to work extra hard to ensure my pension years are not shrouded in poverty.

The reason for opting in or opting out is a personal choice, but I have outlined the huge benefits from staying in your work pension below.

1. It is easier to opt-in than opt-out

When you start a new job, you will automatically be opted in to the company’s pension scheme if you are over 22 and earning at least £10,000 per year. For those individuals in a situation where saving does not come naturally, this can be a godsend. Of course, you can find your own pension scheme. There are many sites on the net, such as Pension Wise, which give guidance, but a registered financial advisor can be a great help.  However, finding your own pension scheme to pay into can be quite time-consuming and a bit of a minefield.

All monies taken from your salary are actually paying for something. Tax is paying for those necessary services we often take for granted. National insurance sets up your state pension and protects you from unemployment. Any money contributed to a pension scheme is not taken from you. Depending on how invested, it will provide a pot of money at a later date and in retirement when it will be essential.

2. Your employer will give you money towards your savings

Arguably the best benefit from a workplace pension is that the company you work for will contribute towards your pension. Under current regulations, the equivalent of 8% of your salary goes into your pension each month. 4% is from you. The government tops this up by 1%. And then your employer contributes a minimum of 3%, which is effectively free money. Now that can’t be bad!

3. The right mindset for the future

In the modern world, where everything happens now, and it feels money is tight, it is easy to save for your retirement years. The whole concept of opting into the work pension automatically makes you focus on financially in the grand scheme of things. It encourages you to think more long-term. As an extra bonus, it may even encourage you to think about your career overall, the income you will need in the future, and the financial goals you will need to reach to cover your outgoings.

4. More than just a pension

It is often wise to think of your pot as more than just a pension. These are savings that could be useful to you in times of emergency. In 2015, the government brought out a new act that allowed people of 55 years and over to access their pension pots. In this way, monies saved or part of monies saved can be used for emergency reasons before you retire. However, if you are thinking of using money from your pension before the mandatory pension age, you must get a registered financial consultant’s guidance.

5. Savings you will never lose

If you do leave your employer, your pension goes with you. You may want to carry on contributing to it if you wish, but either way, the pot of money you have built up is yours and available for your retirement years. In the modern age, when we tend to transfer to different companies more than once in a career, it is important to document where your savings are. Luckily, some websites can help you track down previous pensions, which you can find here.

If you are looking at your pension options, get in touch with a regulated pensions specialist like Portafina or view the information at Pension Wise.

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