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Discussion in 'Pay and conditions' started by DM, Sep 10, 2011.
Opting out would be the most stupid decision you have ever or will ever make. Is that clear enough?
You will not be left with the amount that you currently pay into your pension as you get tax advantages for being in a pension. If you stop contributing, for every £100 you currently pay in you will instead pay £20 extra in Income tax.
You will no longer be in the Contracted-Out NI scheme and so will pay 2% extra in NI, not just 2% on the previous pension deduction, but 2 % extra on everything you earn over about £400 per month. So, if your gross pay is £2,500 per month, you will pay an extra £42 per month in NI.
Each pension year that you buy early in your career is equal to the pension years you buy later in your career. the early pension years cost you less as they are a perccentage of a lower salary. It will cost you far more to try to re-instate the value of the lsot years later. You can't buy added years any more but can buy additional pension payout for retirement. However, the cost is high and the employer does not chip in, so you have to fund the entire extra provision.
To give you an idea of how costly it is ... when it was possible to buy extra years, I asked how much it would cost me as a 48 year old, new to the pension (I'd transferred in my LA pension). I was on the equivalent of M2 and in 2001 it would have cost me over $4k to buy one extra year in the TPS. Deductions from salary for one year at that point were costing me just over £1k.
It is only now that I have retired that I appreciate all those payments I have made over 36+ years.
Even as a student teacher all those years ago, we were told never to stop or cash in pension payments (I don't think you can do that now anyway.)
I appreciate pension seems light years away, but believe me, it comes all too quickly!!
This question comes up every couple weeks on the Forum.
I also repeat that pensions are not just about what you receiveb ,when you retire.Pensions also pay out if you have to retire early because of ill health and if you also die in service. A pension for your husband ,wife, or partner and your children.