Automatic enrolment if you're close to retirement
While automatic enrolment is a great way to start saving into a pension, as you get closer to retiring, its likely impact on your income in retirement gets smaller. There are circumstances when it might make sense to consider opting out.
Savings, debt and state benefits
If you’re within around two years of retiring, there are two reasons why you might want to think twice about staying in your employer’s workplace pension.
The first is any borrowing that you have yet to repay.
Because anything you save into a pension won’t have long to grow before you retire, your money might be better spent paying off debts, particularly those with high interest rates.
The second factor to consider is whether your financial circumstances mean you’re likely to be entitled to means-tested state benefits after you retire (such as Pension Credit and Council Tax Reduction).
- If so, then the advantages of taking a pension income might be reduced
- But if you can take your pension as a lump sum instead and you use it to pay off debts, there’ll be no impact on your benefit entitlements