Automatic enrolment is a great way to start saving into a pension. But as you get closer to retiring, its impact on increasing your income in retirement is likely to get smaller. There are circumstances when it might make sense to consider opting out.
What’s in this guide
Savings, debt and State benefits
Are you within about two years of retiring? Then there are two reasons why you might want to think twice about joining your employer’s workplace pension.
The first is debts you’ve yet to repay. This is because any money you put into a pension won’t have long to grow before you retire. So your money might be better spent paying off debts – especially those with high interest rates.
The second is whether your financial circumstances mean you’re likely to qualify for means-tested State benefits after you retire – for example, Council Tax Reduction. If so, the advantages of taking an income from any pensions you’ve built up might be reduced.
But if you can take your pension as a lump sum instead and you use it to pay off debts, it might not affect the benefits you qualify for.
You can decide if it would be better for you to pay off any debts instead of contributing to your workplace pension at this stage.
Use our workplace pension contribution calculator
Find out how much you and your employer will pay into your pension under automatic enrolment with our workplace pension contribution calculator
Need more information on pensions?
Call us free on 0800 011 3797 or use our webchatOpens in a new window. One of our pension specialists will be happy to answer your questions.
Our help is impartial and free to use, whether that’s online or over the phone.
Opening times: Monday to Friday, 9am to 5pm. Closed on bank holidays.
