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Think before you opt out of your workplace pension

Think before you opt out of your workplace pension

Choosing to forgo your workplace pension could cost you far more by the time you retire, says Paul Lewis.

Paul Lewis

Published: August 25, 2026 at 1:26 PM

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New figures reveal that, in a single year, half a million people said “no thanks” to joining a workplace pension.

Like almost everyone taking up a new job, they were automatically enrolled into a scheme: auto-enrolment applies to everyone aged from 22 to state pension age who earns £10,000 a year or more.

But they opted out – as you can in the first month – and thus gave up the free money towards their retirement offered by both their employer and the Government.

Every £10 you put in gets a £2.50 bonus from the Government through tax relief; and turning down the contribution added by your employer is like turning down a pay rise.

These latest official estimates are for the five years up to 2023, and show nearly one in 10 workers refused the workplace pension.

The detailed figures reveal that the biggest group opting out are people in their 20s – who stand to gain the most. Their contributions are invested and earning interest or dividends for longer, and compound interest means it grows substantially by the time they retire.

But in your 20s, of course, that seems a long way away when there are so many other calls on your money.

Auto-enrolment has nearly doubled the number of people with a workplace pension – 22 million are now paying into one, which is 10 million more than before it began.

The amounts being paid in are tiny, though. The contributions are set at 5% from the employee and 3% from the employer, but those numbers exaggerate the amount going in because they are applied to a band of earnings from £6,240 a year to £50,270, and can never be more than 7% of total earnings.

For people on national living wage they are only 6%.

Our free Radio Times pension guide provided by Pense walks you through everything you need to know

Those amounts are half or less of what’s required to give people a decent retirement.

A recent report by Pensions UK suggested a rise to 6% each for workers and their bosses, but even that total of 12% of pay is less than is needed.

Teachers, for example, pay in up to 12% of their wages and the local councils that employ them pay in more than 28%.

It’s best to stay in your workplace scheme and, if you can afford it, pay in more and ask your employer to match it. That will mean a better retirement.