You’d be a fool to opt out of auto-enrolment

Yesterday, the government began to phase in an ambitious scheme that will eventually see eleven million workers enrolled in workplace pensions.

Anyone aged 22 or above and earning more than £8,105 a year will automatically be signed up to an employer scheme, although it will take five years for everyone to be signed up.

But I was astonished to see that the vast majority of MSN readers don’t plan to remain in the scheme once they’re signed up. 

If times are tough now, imagine how bad they’ll be when you’re unable to work and have an even tighter income. 

A poll on the site showed that 79% of our readers intend to drop out. As I write, just over 1,500 people have voted – 38% said they will opt out because they don’t have enough money to spare, while 41% said they were opposed to the scheme and could invest better elsewhere. Only 21% - just over one in five - plan to remain in the scheme.

I think this is crazy. Of course money is tight at the moment; high inflation and stagnant salaries have made this a tough time for all but the richest Brits.

But we simply cannot afford not to save for our old age. If times are tough now, imagine how bad they’ll be when you’re unable to work and have an even tighter income.

There’s something distasteful about planning to rely on benefits, whether you’re refusing to get a job or refusing to save for your retirement.

The advertising campaign has been characteristically upbeat. Instead of warning of a poverty-stricken old age, its focus is on enjoying retirement. ‘Life’s full of little pleasures. Make sure it stays that way,’ and: ‘You’ll still want dancing shoes at 70’.

So whether you fear extreme poverty or simply want to be able to treat yourself occasionally, you need to be saving now.

By not saving for retirement, you’re opting for an old age on benefits. Taxpayers will need to top up your state pension with benefits to allow you to manage financially.

Of course, if you need benefits at any time of your life, then the state should provide them. But there’s something distasteful about planning to rely on benefits, whether you’re refusing to get a job or refusing to save for your retirement.

You’ll potentially be costing your own children money as they struggle to support you. 

Finally, it’s not just you making contributions. Your employer will eventually make payments worth 3% of your salary and you’ll also receive 1% in tax relief. That’s free money to help you enjoy a comfortable old age.

I do see that there are some issues with the scheme, it’s far from perfect. Many people find it complex and inflexible. Others point to previous pensions scandals. Still more want to pay down debt and save for mortgages before committing to their pensions.

But the country can’t afford to support every pensioner as our population grows. You’ll be using up resources that could be spent elsewhere, and you’ll potentially be costing your own children money as they struggle to support you. All that could be avoided by opting to save right now.

Unless you have an alternative pension pot, then I think you’re crazy for opting out of the scheme. Crazy, and a little irresponsible. 

• Felicity Hannah is a personal finance journalist living in the north of England.

WHAT DO YOU THINK? ARE YOU SAVING FOR RETIREMENT ALREADY? WILL YOU REMAIN IN THE SCHEME OR OPT OUT? DO EMPLOYERS DO ENOUGH?

LET US KNOW IN THE COMMENTS SECTION BELOW OR USING #SOCIALVOICES ON TWITTER

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