Should I opt out of my workplace pension?

The short answer: for most people, no. If you opt out, you lose your employer's contribution and the tax relief, so you give up more than you save. On a £25,000 salary, staying in costs about £63 a month from your take-home pay but puts £125 a month into your pension. Opting out can make sense for a short time if you are struggling with essential bills or expensive debt.

What you give up by opting out

At the auto-enrolment minimum, 8% of your qualifying earnings (pay between £6,240 and £50,270) goes in: 5% from you, including tax relief, and 3% from your employer.

For every £1 it costs you, about £2 goes into your pension. Opt out, and the employer money disappears: it is not added to your pay instead. Many employers pay more than the minimum, which makes opting out even more expensive.

Over 30 years, the £25,000 example could build a pot of about £72,881 in today's money, assuming 3% growth above inflation and no pay rises. Growth is not guaranteed.

When opting out might make sense

• You cannot cover essential bills. Rent, food and energy come first. You can rejoin when things improve.
• You have expensive debt. Paying off a credit card at 25% interest can beat the pension for a while. See which debt to pay off first.
• You have special pension protection from the old lifetime allowance, or have already started drawing a pension flexibly, which cuts what you can pay in with tax relief to £10,000 a year. Take advice first.
• You are on a very low income and your scheme uses net pay, where historically low earners missed out on relief. HMRC now tops up these members, so this matters less than it used to.

Wanting the money for something else, like a holiday or a car, is rarely a good reason, given what you give up.

Better options than opting out

• Pause and come back: stopping contributions for a few months and restarting keeps what is already invested.
• Check salary sacrifice: if your employer offers it, the same contribution costs you less because you save National Insurance. See salary sacrifice.
• Check your take-home properly: 5% on £25,000 reduces your take-home by about £83 a month in a net pay scheme, less than people expect.
• Get free help: MoneyHelper, the government-backed service, gives free guidance on pensions and budgeting.

How to opt out

1. Get the opt-out form from the pension provider, usually online. Your employer cannot opt you out or hand you the form.
2. Return it to your employer within the opt-out window, one month from when you were enrolled, and you get back everything you paid.
3. After that window, you can stop contributing but cannot get a refund; what is in stays invested until you can take it from 55 (57 from April 2028).

Your employer will re-enrol you about every three years if you are still eligible. You can opt out again each time.

Your rights

Employers must enrol you if you are 22 or over, under State Pension age and earn more than £10,000 a year. Below that, you can ask to join, and if you earn over £6,240 your employer must contribute. It is against the law for an employer to encourage you to opt out. See employer pension matching and how much pension you should have by age.

If you get Universal Credit

Universal Credit is worked out on your earnings after pension contributions. So if you are on the 55% taper, part of what you pay into your pension is effectively made up by a higher Universal Credit award. Someone paying £40 a month into their pension may see their take-home fall by only about £18 once the extra Universal Credit is counted, while still getting the full employer contribution and tax relief. That makes opting out especially poor value for people on Universal Credit.

If you are struggling with debt

Cutting your pension can look like an easy way to free up money, but it is usually the most expensive saving you can make, because you lose your employer's money too. Free debt advice from StepChange, National Debtline or Citizens Advice can often find more room in a budget than opting out would. If you do stop, set a date to rejoin. Your employer must re-enrol you about every three years anyway, if you still qualify.

This is general information, not financial advice. Contributions shown are the legal minimum on qualifying earnings in 2026/27.