Contribute for pension or not?

Guys, question, how stupid would I be if I decide to not contribute to my pension and keep the amount and invest it by myself?

I am still researching and trying to understand, so if you guys already have researched and can share more or tell me where I am wrong, much appreciated.

The State Pension (paid for by national insurance contributions) age is 67 from 2028. This means I can get it in 2065. And I can have it regardless if I contribute to my pension or not as I must have to pay NI.

On the other hand, I can access my pension money as early as when I turn 55. I need to contribute 5% and the employer will contribute 3%.
Not paying for the pension means losing a 3% bonus from the employer and 20% of that amount in taxes. If I pay £100, the employer would pay £60, which goes to my pension fund, and I am not sure what the average return rate is, but it should be around 5/5.5%.

Now, If I invest it by myself, even going full S&P 500, I might achieve more, around 8%. After paying the 20% taxes on my £100, I’d get £80 to invest, which can be invested into my ISA as currently not filling it every year, and probably won’t be able to fill it for a long time as I will probably send money back home for buying land or building on my dad’s land + need to support the family financially. So that’s basically tax-free.

Using some compound calculator, I can see that the difference is not much, and considering the fact that I need to pay around 40% in taxes if I decide to access all the money in one go (the first 25% is tax-free), looks better to invest by myself.

My plan is to not be forced to retire at 55, and I am trying to retire as early as possible, maybe when I am 40 or 45 at most, and this would give me more “freedom” and “control”, but it’ll probably be a bit more riskier.

Any advice? Am I thinking wrong or missing something?

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Its a difficult one to say, but I suspect you are still better investing in your pension pre tax.

The fact you are talking 20% tax, lets say you earn 25k for arguments sake.


Option 1 - you receive a net wage of £19,512.40, pay in £1,250 of your pension, and your company pays in £750. You can claim 25% of your pension tax free, so ignoring any capital gains, lets call that you get £1700 later in life.

Option 2 - You receive a net wage of £20,512.40. To put the same £1700 into your ISA, leaves you with £18,812.40

I know which one I would take.

You could also use a SIPP or LISA to top up your ISA, but thats up to you.

Option 1 is even better, if your employer does it through salary sacrifice.

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Generally, most are best off sticking with a workplace pension for the tax relief and employer contribution.

It doesn’t have to be an either or. I pay into a work pension to get the max contribution from my employer. I tend to transfer them into my Sipp when I move jobs unless there’s good reason not to, such as favourable charges or if it’s a defined benefit scheme.

As well as my Sipp, I pay into a Lisa and Isa to give myself options which are tax free on access. I’m hoping the Isa will bridge the gap before I can access my Sipp and Lisa, allowing me to retire early.

By the way, don’t bank on the state pension being available by the time you retire!

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Goosh i need to start tracking down all the employment pensions i have contributed into the last 20 years. The trouble is, cos i average 3 years per employer due to insatiable greed for higher pay and sometimes running two jobs of lately, my pensions would be scattered all over the whole place.

Back to the topic, without getting into the nitty gritty number crunching, it’s always best to invest in the different classes of assets - well the biography of successful investors says so

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There are online apps/websites that help you find old pensions and consolidate them. Google it and make sure you choose a legitimate one.

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