Opting out

A question about : Opting out

My sincere apologies as this has probably been asked before.

As soon as my current job became stable (contract changed from fixed term to indefinite/permanent) I set up a stakeholder pension with Scottish Widows which I have paid into every month for the past 8 years.

I had an appointment with an IFA about 18 months ago who looked over the pension for me and he made enquires with Scottish Widows came back to tell me that the fund was doing rather well even considering the economic situation (I understood they were known for financial stability which is why I chose them as well as being linked to Lloyds who my parents have banked with for years)

Also a couple of years ago I had to take a pay cut to keep my job.

I understand I am due to be automatically enrolled into my employer's pension scheme from March.

I did contact our Pensions Manager to explain I wanted to opt out and he explained it would be illegal for them to do this until they opted people in.

So how do I opt out before they deduct money from my salary or is it a case of just having to claim it back?

Best answers:

• The simple answer is you can't. It is not possible to opt out before you are auto-enrolled. You have to wait until it is done. Your employer also won't be able to supply with you the form you will need to opt out, you will need to approach the provider directly. Therefore, there will be deduction of contribution from your salary, which will then need to be refunded to you when your opt out has been actioned.
  However, one thing to bear in mind - whilst it is good to be contributing to your Stakeholder plan, opting out of your employer's scheme will also mean you are losing the benefit of their contribution. I don't know what level of contributions you are currently making, or what basis the employer scheme is being run on, but it may make sense to reduce the contributions to your personal scheme by the minimum amount required for your employer scheme, and pay them into that scheme instead in order to get the benefit of the contributions they will make, if this affordable for you.
• Why would you want to opt out? You would be turning down the employer contribution which is effectively free money. Your existing pension cannot compete with free money.
• Firstly, thank you both for taking the time to reply
  I had to take a rather large cut to hold onto my job,
  Absolutely no information has been circulated about how my employer is going to implement this nor was there anything on our staff intranet last time I checked about a week ago so I have absolutely no idea how much they are going to deduct from my salary come March.
  If they decide to take a couple of hundred quid then I will be going into my overdraft to meet my commitments for the month and this is a situation I don't want to get into again.
  While the intentions are on the face of it are well meaning (and from the Government's point of view it'll shift some of the responsibility onto someone else) it's been executed as a tax and I expect many employers will cut salaries so it does not cost them any more in real terms.
  If you are on a below average salary a deduction is a deduction, no matter how you spin it.
  Is this really progress?
• Wait and see how much the employer will put in before you decide. It really is foolish to contribute to a pensions yourself, over tkaing up ine with employers 'free' contributions.
  So, if you reduce your payments into your personal pension accordingly, then you won't take home any less than now and won't need to use the overdraft.
• Thanks all.
  Some info has gone up on our intranet but I've been so busy today I've not had chance to read it.
• Only one NEST is NEST, and that's the NEST.
  NEST is a product and is set up to meet the criteria of Auto-Enrolment.
  Many other schemes/pensions will also meet the criteria and if an existing company pension is in place, it is likely going to 'adjust' to meet the new terms (if not already ticking all the boxes).
  NEST, in my opinion, is higher charged than many other available and therefore it's difficult to recommend an employer goes down that route.