Company pension: In or Out? Watch

posthumus
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Hey guys

I started my first job back in October and was automatically opted into the pension scheme offered.

I have now made a contribution for 4 months, which is around 5% of my gross monthly income (£130). This contribution has been matched by my employer.

However I do not know whether it is worth staying in this scheme? I can just about afford to make that contribution, but don't know whether it is worth it. Some people have told me that anything can happen by the time I turn 65 and I'm better off having some of that money now.

If I opt out now, I also won't get the money I've contributed so far back and I can't opt back in. I've delayed it so much because I can't make my mind up.

Any thoughts? What are your views on pensions and given the choice.... did/would you choose to opt in or out?

Many thanks in advance to any responses.
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estel
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If you can afford to make your contribution you should absolutely continue to do so, or you're leaving the 5% match from your company on the table.

Some people have told me that anything can happen by the time I turn 65 and I'm better off having some of that money now.
I'm not sure what they're referring to here! Isn't it also a really big risk to turn 65 and find yourself living in poverty?
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ch0c0h01ic
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(Original post by posthumus)
Any thoughts? What are your views on pensions and given the choice.... did/would you choose to opt in or out?
If you can afford to do it go for it.

There is little reason to turn down free money, especially one that will effectively double your contribution/investment without any additional risk on your part.

A 5% matched contribution in the private sector is pretty good. My employer only matches contributions up to 3%.

(Original post by posthumus)
If I opt out now, I also won't get the money I've contributed so far back and I can't opt back in.
I think you're mistaken.

Barring any hideously exploitative wording in your employment contract (very unlikely) the money you have contributed so far should be protected. The only catch is that you probably won't be able to withdraw any funds until retirement age (without significant financial penalties).

(Original post by posthumus)
Some people have told me that anything can happen by the time I turn 65 and I'm better off having some of that money now.
It depends on your priorities, when you plan on retiring, what you want to do when you retire and the quality of life you want to lead before and after you retire.

If you plan on working until you literally drop (ie; 70+) and spending the end of your days in relative poverty (ie; living off the state pension) that's fine - don't contribute to your company pension and don't make any additional savings and investments for retirement.

By all means make some "emergency savings" (eg; up to 3-6 months living expenses) to keep yourself out of high interest debt but the earlier you start making retirement contributions the better. Bear in mind that an extra 5-10 years of contributions at a 5% matched contribution could have a substantial effect on your pension pot, to the tune of £10,000s if not £100,000s over time with compound interest.
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Reue
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(Original post by posthumus)
I have now made a contribution for 4 months, which is around 5% of my gross monthly income (£130). This contribution has been matched by my employer.
Your company is giving you 5%.. for free. Plus you'll be getting 20% tax relief. Paying into a company pension with matched employer contributions is by far the most efficient form of saving, you'd be mad to opt out of it.

(Original post by posthumus)
Some people have told me that anything can happen by the time I turn 65 and I'm better off having some of that money now.
What happens when you turn 65, retire and realise your income goes from say £30k to £10k?

(Original post by posthumus)
If I opt out now, I also won't get the money I've contributed so far back and I can't opt back in.
Yes you can.
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Good bloke
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The golden rule about pension funds that employers will pay matched contributions into is to pay in as much as you can, as early as you can, for as long as you can.

Start here:

http://www.moneywise.co.uk/pensions/...afford-to-make
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Rakas21
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Almost no other investment will see an annual top-up of 5% plus interest.

Whoever suggested you'd be better off going for the money now was not performing an economically rational calculation.
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