Is it logical to opt out of my pension?

[fromtheearth]

Hi, I’m an international PhD student working at a university. I have received my first month’s salary today which I realised was much lower than expected - it’s because they auto-enrolled me into the USS pension scheme. I asked about personal vs employer contributions so apparently I pay 9.8% of gross income while the university pays 21.6%.

I was ready to opt out before I heard the university contribution - sounds super high. I worked before and my employer was contributing the legal minimum.

I’m wondering if I should stay since:

• I’m being paid peanuts (if you know the universities, you know) so losing 10% of my income really requires me to use my savings to survive in London - so would that be logical?
• i might not stay in the uk much longer (maybe 5-10 years more) so not sure building a pension here is very logical if I’m living elsewhere. Also sounds like I can’t take my pension to my home country due to there not being an approved pension provider back home.

I have another pension with nest from my old employer though so I have some money already in the system (v. little though) - so should I just pay?

Edit: overwhelmed by the response - thanks everyone! I guess I shouldn’t opt out. I think I explained myself a bit poorly - I plan to stay in the UK for some more years but not necessarily in the university. So the USS benefits might only be for one year.

 

[reallyray79]

@fromtheearth You only work around 40 years for a pension so please don’t use, “it’s only 5 - 10 years”, that’s up to a quarter of many people’s earning years

Secondly, you can access you uk pension abroad, it’s legally yours

I can’t answer the affordability as you have not provided figures but it’s rare that someone should be suggested to opt out of a pension

 

[fromtheearth]

@reallyray79 So let me provide the figures then the gross salary I’m paid is 18k. With the pension payment it comes to around 1200 per month. This is my only source of income.

 

[mikesmiles]

@fromtheearth Remember if you opt out that 9.8% of your salary then gets taxed at 20%. Works out at roughly another £117 in your pay. People I know that have opted out of pensions are always surprised how little their pay goes up. If there’s anyway other way to bridge that shortfall I’d look at that before leaving a pension scheme.

 

[easyrider2]

@mikesmiles Little addendum but I think PhD stipends are generally tax free, at least my sister's was and she finished only about 2 years ago.

 

[james510]

@mikesmiles 13% national insurance on top of that so £98

 

[mikesmiles]

@james510 Good catch!

 

[jmb1031]

@fromtheearth The pension in academia is one of the only good features of employment in academia — don't opt out.

 

[jasonm]

@jmb1031 This is what's keeping me from leaving academia along with a large amount of annual leave.

 

[jackster]

@fromtheearth https://www.uss.co.uk/for-members/youre-a-new-joiner/what-your-pension-might-look-like

Put your salary in there, it's worth keeping if you can manage it.

 

[fromtheearth]

@jackster This is such a great resource, thanks for pointing it out!
!thanks

 

[mydogsnameisharry]

@fromtheearth Is this your PhD stipend? If so you shouldn’t really be paying pension on this.

 

[fromtheearth]

@mydogsnameisharry No I’m in the writing up year so unfortunately don’t receive my stipend anymore. This is a teaching contract.

 

[mydogsnameisharry]

@fromtheearth Ah ok makes sense. Hopefully as you are writing up, this means you only have a few months to bear before you move on to better wages!

 

[trishamurph]

@fromtheearth Even if you retire outside of the UK the pension scheme will still pay you your pension income.

 

[totesthegoat]

@fromtheearth Throwing away 21.6% free money. Understand the tight budget but, if you can manage it, future you will love you.

 

[onlinecash]

@totesthegoat Plus the 20% on his contribution so another 1.92%
Free money at 27:1

And as this money will sit in your pension the longest, it worth more than any money you will put in.

Most pension are match up to 5%

You'd need to get a ~20% pay rise and put every single penny into your pension to match this in such a job.

 

[sapiens]

@totesthegoat It’s not quite how it works as the 21% is how much the university pays towards the scheme. The amount you get back is unrelated to this amount, as you will get a percentage of your average salary. Just a point.

 

[joyincite]

@sapiens not all pensions are average salary

 

[sapiens]

@joyincite They explicitly said the USS pension which is.