Can you opt out of a workplace pension? If you’ve been automatically enrolled in a workplace pension, you can choose to opt out of the pension scheme, but before you do, make sure you know what will happen to your retirement benefits!
In the UK, employers must provide a workplace pension scheme for their employees, who are automatically enrolled in the scheme once they start their employment, and pay contributions into the pension scheme if the worker earns at least £10,000, is under the State Pension age and works in the UK, but workplace pension opt out is always an option for who may not be interested in participating in the programme.
| Can you opt out of a workplace pension? | If you’ve been automatically enrolled in a workplace pension, you can choose to opt out of the pension scheme. If you opt out within 30 days of being enrolled, you will receive a refund of contributions made. |
| What happens when you opt out of a workplace pension? | Opting out of the scheme after 30 days will result in forgoing your right to claim the contributions your employer has made for you and any tax relief provided by the government. |
| Will I lose my benefits if I opt out? | If you opt out of your workplace pension scheme, you will be missing out on the contributions your employer has made for you into your pension pot, as well as any tax relief from the government. |
Joining a workplace pension
For those who have opted out of their workplace pension scheme, but are having second thoughts, it’s possible to opt back into your auto-enrolled workplace pension scheme, all you need to do is contact your employer. However, if you’ve opted out and try to opt back in under a year, they are not obliged to accept you!
What you, your employer and the government pay
As mentioned before, as an employee, your employer is required to make contributions for you as long as you fall into certain criteria, but how much they pay in as pension contribution depends on the type of pension scheme and whether or not you were automatically enrolled or joined voluntarily. For example, in a defined contribution pension scheme, your employer matches 75% of the contributions that you pay, while the government pays 25% in the form of tax relief (up to a certain point).
If you want to leave your workplace pension scheme
You cannot be forced or asked to leave your pension scheme, but if you’ve been automatically enrolled in your workplace pension and you want to leave it, you can choose to opt out. To get the process started, ask your employer to provide you with the contact information of the pension scheme provider – they will be able to give you the instructions for how to opt out, and tell you specifically what will happen to any benefits that you have in the pension pot.
Can I opt out if I don’t want to join my employer’s workplace pension scheme?
Can I opt out of workplace pension? You are able to opt out of your employer’s workplace pension scheme if you’ve been automatically enrolled, though after you opt out, your employer will no longer pay a savings contribution for you. If you opt out, you may qualify for a refund of any contributions you’ve made, but in some cases you may not be able to receive your contributions until you’ve reached pension age! In that case, it may make more sense for you to make a pension transfer, to switch your contributions from one pension to another without having to truly opt out.
How to opt out of workplace pension?
Your pension provider will be able to explain what will happen to your benefits if you opt out of the pension scheme, and tell you the specific forms you will need to fill out in order to officially opt out of the auto enrolment. In general, the process for pension auto enrolment opt out is relatively simple, you will need to fill out and sign a workplace pension scheme opt out form and return it to your employer, or in some cases, the pension provider may even have an online form that you can submit to them directly.
What happens when you opt out?
What happens to my benefits if I opt out of workplace pension? If you choose to opt out of the scheme within 30 days after you’ve been auto-enrolled, you will receive a refund of any payments you may have made into the scheme during that time. Otherwise, if you decide to opt out after 30 days of enrolment, rather than receive the full benefits, you will only be able to receive the contributions that you’ve made yourself, if the pension scheme allows for a refund of contributions and you’re eligible to receive one.
Opting out of the scheme after 30 days will result in forgoing your right to claim the contributions your employer has made for you and any tax relief provided by the government. In the cases where the pension scheme does not provide for refunds of contributions, you will have to wait to take out the money until you have reached retirement age, which is at 55 (or 57 starting from 2028), so it might be a good idea for you to start learning how to invest money for savings on your own!
Statutory information to be included in the opt-out notice
To be valid, the opt out form must contain specific information and declarations from the employee, if not the pension scheme provider will not accept the form until all the information is provided. The form must contain the following:
- The employee’s full name, date of birth or National Insurance number
- The name of the employer
- The date in which the form was submitted
- A signature or affidavit confirming the employee intends to submit the opt out notice
- How long does opting out last for?
Unlike deferring state pension, after remaining outside of the pension scheme for three years, if you qualify, your employer is required to re-enrol you into the pension scheme. This is to account for changes in your personal or financial circumstances, and paying into a retirement savings may now make sense for you. Similarly, if you switch jobs, your new employer will most likely enroll you back into a pension saving programme. If you want to remain un-enrolled, you will have to fill out another opt out form, since the form refers to the specific pension scheme of your employer. If you transition to self-employment, consider opening a self-employed pension for yourself to start saving for retirement.
What benefits could I lose if I opt out?
If you’re interested in opting out of your workplace pension scheme, consider speaking first with your pension provider to understand better what benefits you will be missing out on if you opt out and with a financial adviser to see what pension options there are for you.
If you opt out of your workplace pension scheme, you will be missing out on the contributions your employer has made for you into your pension pot, as well as any tax relief from the government. In addition to that, you could lose access to benefits that your pension scheme might provide for you, like coverage if you fall ill and are unable to continue working until your retirement age.
FAQ
Can I opt back into a workplace pension scheme?
It’s possible to opt back into a workplace pension scheme, even if you previously opted out of it, though, you may not be accepted by the workplace pension scheme provider.
How much does my employer pay into my workplace pension?
In a defined contribution pension scheme, your employer matches 75% of the contributions that you pay, while the government pays 25% in the form of tax relief.
What information do I need to give in order to opt out?
In order to opt out of the workplace pension, you will need to fill in a specific form requesting your opt out of the scheme. The form must contain specific information and declarations from the employee, otherwise the request will not be approved.
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
