Consumer Rights: 'I signed up to my firm's pension scheme, but can I really afford it?'
A reader is advised to think carefully before opting out of automatic enrolment – the state doesn't offer a great deal when retirement comes round
Sunday 18 November 2012
Q: The firm I work for added me to its pension scheme. I was worried about the difference it would make to my pay but now that I've had my first pay packet, it's worse than I thought. Basically, I've had a pay cut and I was short of money at the end of the month. Everyone says I should be saving into a pension but I really don't think I can afford it. Am I right in thinking I can say no thanks?
PJ, via email
A: Yes, you are right, but think carefully before making your decision. The new pension arrangement began in October, and eventually all employees will automatically become members of their employer's pension scheme. Employees of the UK's biggest firms are affected first, and the same rules will be applied to smaller firms over the next few years. Instead of deciding whether to join a pension scheme and start saving, workers have to decide whether they want to stay in a scheme or actively opt out.
You may have made it clear you didn't want to join up, but employers have no choice but to sign everyone up in the first instance. If you decide to opt out, your employer will have to try again in three years by automatically re-enrolling you. Again, you will have to decide if to stay in or opt out. So it's important to do the calculations now and each time you find yourself auto-enrolled. To begin with the minimum that has to be paid into a scheme is 2 per cent of your salary. Half comes from you and the rest from your employer, and the Government in the form of tax relief.
From 2018, the minimum that will be paid in is 8 per cent with 3 per cent from your employer. In reality, you've had a pay rise but because you can't get your hands on the additional amount until you retire, and you have less to spend, it feels like a cut. If you opt out, you won't get the benefit in the long term of the extra that your employer is now paying in. It is important to save for retirement because the amount of money pensioners get from the state is small. Many people get a nasty shock when they realise just how little they have to live on if that is their only source of income.
If you want to have a reasonable standard of living in retirement, you have to save. You may feel you can't afford to do that on your current salary. Will you be able to do so if and when your salary goes up? Are you young enough to put off saving into a pension for a few years? The younger you are when you start, the better off you will be in retirement. It's very easy to keep finding reasons not afford to do it now such as getting married, having children, buying a house.
Before making the decision to opt out, go through your spending to see if there is anything else you could cut down on that would allow you to save into your pension. It's also worth going through all the figures with the person at work responsible for auto-enrolment so you know what you'll be losing if you do say no thanks.
Q: I have been badly treated by the NHS, and want to claim compensation. I've been ill for years, and my treatment has been good in the past, but my most recent bout of illness wasn't diagnosed for months, and I had to have much more invasive surgery than would otherwise have been necessary. I lost a lot more income through time off work. There must be some way of getting justice. I can't afford a solicitor.
A: Cases like this are difficult to win. Even if your treatment has gone wrong somewhere, it may be no one's fault. You have to prove someone in the chain of people involved has been negligent. That can be difficult and emotionally demanding.
Start by going through the NHS complaints system. Ask your doctor for details. If the hospital accepts your arguments, you may be offered compensation and an acceptable settlement could be reached. If you don't get a settlement in your favour, you have to choose between dropping the claim or taking a case to court.
You need to discuss this with a solicitor with expertise in such cases. Many will give you a first appointment free. Check with the Law Society lawsociety.org , ask your local advice agency or talk to the charity Action Against Medical Accidents avma.org.uk
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