Employees warned against pension opt-outs
12th March 2019
Opting out of a workplace pension could cost employees almost £542,000 in savings throughout their working life, estimates from Aegon show.
From 6 April 2019, auto-enrolment minimum contributions are set to rise from 5% to 8% of the worker's qualifying earnings.
This includes a minimum employer contribution of 3% and a corresponding employee contribution of 5%, and also benefits from government tax relief.
According to Aegon's calculations, if a 22 year old on average earnings were to opt out of the scheme from April and never join again, they would miss out on £541,875 of savings over 46 years.
Figures from the Department for Work and Pensions show that around 9% of employees opted out of their workplace pension in 2016/2017.
Kate Smith, head of pensions at Aegon, said:
"Whilst retirement may seem distant for many young workers and is often pushed to the back of minds, choosing to opt out of a workplace pension can be a costly mistake.
"Immediate priorities such as saving for a house deposit will inevitably be the focus for those starting on the career ladder.
"However, young employees should not choose to forgo their pension contributions as they could stand to lose out on a significant pension pot if they fail to rejoin."
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