Why opting out of auto-enrolment could cost you thousands

January 30, 2019

The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article.

At Pension Access we’re big fans of auto-enrolment. We understand saving into a pension isn’t the top of everyone’s to do list, plus they’re notoriously complicated. The beauty of auto-enrolment is you don’t need to think about paying into your pension – it just happens! The money is taken directly from your wages before it even hits your bank account. So, after a while we’re sure you won’t notice it’s gone. You even have the option to contribute more if you feel you can.

With a workplace pension, 8% of your annual salary will go straight into your pension. And the good news is you’ll only be putting in half yourself. The additional 4% comes from tax relief and contributions from your employer. Put simply, that’s free money into your pension that you wouldn’t usually have. And you wouldn’t turn down free money, would you? Especially if it could be earning you thousands of pounds…

Here’s why you shouldn’t opt out of your workplace pension…*

As this table shows, opting out could leave you tens of thousands of pounds worse off at a time when you really need the money. By remaining opted in to your workplace pension scheme you could be in a better position at retirement. Especially if you can top up your own contribution by an amount that’s comfortable for you.

If you are unsure of what the right decision for your financial circumstances is, it is always best to speak with a regulated financial adviser.

^*Example based on 35-year-old with no prior savings, saving for 30 years (planned retirement age 65). Earning £20,000 throughout this period. Example 3 and 4: Auto-enrolment contribution based on full salary. Additional contribution includes employer 3% and tax relief. 5% annual return applied. Auto-enrolment calculator used: Money Advice Service. Pension charges not applied. Inflation not included.

Pension Access is a trading name of Harbour Rock Capital Limited which is registered in England & Wales as a Limited Company, No. 10290349. Authorised and regulated by the Financial Conduct Authority, No. 754580. Registered Offices: Affinity House, Beaufort Court, Sir Thomas Longley Road, Rochester, Kent, ME2 4FD. Telephone: 0800 009 3388. Email: pensionaccess@harbourrockcapital.co.uk