Common reasons members opt out of the Scheme
Below we’ve listed the common reasons why members may consider opting out of the Scheme.
I don’t want to pay contributions towards a pension
Although pension contributions may appear to take up a significant portion of your pay, they’re not taxed. This means you pay tax on your earnings after your pension contributions have been deducted, so the cost to you is less than the amount shown on your payslip.
If you’re an existing member of classic, classic plus, premium, nuvos or alpha, you can choose to switch to the partnership pension account.
With a partnership pension account, you decide how much you contribute. This means even if you choose not to make any contributions, your employer will still pay in. If you do contribute, your employer will match your contributions up to an additional 3%.
To switch to the partnership pension account, you’ll need to complete a Pension Switching form and return it to your employer at least two months before the date you want the change to take effect. You won’t need to complete an opt out form.
It’s too early or late in my career to think about a pension
It’s never too early or too late to start building up a pension, the earlier you start the better your pension will be.
Think about the lifestyle you want when you retire and how this will be paid for. For example, if you like to have holidays abroad, how much does that cost and how will this be paid for once you retire?
I’m not planning to stay in my job for very long
If you leave or opt out of the Scheme within one month of joining, your employer will automatically refund any contributions you’ve made.
If you leave or opt out after one month but within three months and you’re below normal pension age, your employer will refund your contributions minus tax unless you already have a preserved award or a transfer value in the Scheme. If you’re over normal pension age, you’ll receive a pension award instead.
If you leave or opt out with between three months and two years’ service before normal pension age, you may be able to transfer the value of your pension to another scheme or receive a refund of contributions minus tax, provided you don’t already have a preserved award or an incoming transfer from a personal pension. If you’re over normal pension age, you’ll receive a pension award.
If you have more than two years’ service, your pension will be preserved and held in the Scheme until you claim it or apply to transfer its value to another pension scheme.
If you have a partnership pension account, you can take it with you when you leave.
I have other financial priorities and/or can’t afford to contribute to a pension right now
It’s worth remembering that your pension contributions are not taxed and therefore, cost you less than the rate shown on your payslip.
As an alternative to opting out, have you considered switching to the partnership pension account?
The partnership pension account is a Defined Contribution (DC) scheme, which means any contributions made are invested to provide a pot of money to fund your retirement.
With a partnership pension account, you decide how much you contribute therefore even if you choose to not make any contributions yourself your employer will still contribute. If you decide to contribute, your employer will also match your contribution up to an additional 3%.
I am concerned that there may be tax and annual allowance or lifetime allowance limit implications
The Lump Sum Allowance (LSA) limits the amount of tax-free lump sum you can receive from your pensions at retirement.
The LSA is £268,275. This is equal to 25% of the Lifetime Allowance (LTA) in place before 6 April 2024 (£1,073,100).
The Lump Sum and Death Benefit Allowance (LSDBA) limit the amount of tax-free lump sum you can receive during your lifetime or when you die. The LSDBA is £1,073,100.
Please note: LSA/LSDBA limits may be higher if you have Lifetime Allowance protection.
