UCL Human Resources - Opting out of a Pension Scheme

Opting out of the Pension Scheme

As a member of one the UCL pension schemes you and your family currently enjoy the financial security afforded by the excellent benefits within a final salary pension scheme. The full range of the benefits can and should be understood by reading your pension scheme main booklet previously provided to you by UCL.

As a member of your scheme you do have the right to opt out of scheme membership, but why would you want to?. Also, your employer, UCL is also contributing towards your pension.

Before leaving the scheme, you must ensure you think carefully and consider and fully understand the financial consequences of this action and the benefits you and your family will be losing. By opting out of your scheme membership you will:

Pay higher income tax and national insurance contributions
Lose the equivalent of up to 14% of your pay in employers pension contribution
Lose entitlement to lump sum life insurance cover of up to 4 times your annual salary (depending on which pension scheme)
Lose entitlement to pensions for your dependant and child(ren) in the event of your untimely death
Have to undertake a medical if you subsequently change your mind and wish to re-enter pension scheme membership (even if with another employer)
Reduce you and your family’s income at retirement age; and
Your take home pay will not increase by the employee pension contribution (ranging from 6% to 8.5% depending on which scheme you are considering opting out of), as the true cost of scheme membership can be up to less than 3%, because of the reduced income tax and national insurance contributions scheme membership affords which you would no longer benefit from if you opt out of the pension scheme.

From 1 May 2010 PensionsExchange for USS & SAUL is being implemented. This will meant that the cost to you of your SAUL & USS membership will reduce, without affecting the level of your benefits. If you decide to proceed with opting out of SAUL or USS, you will automatically be taken out of the PensionsExchange arrangement relating to the scheme that you are opting out of.

If, by opting out of scheme membership you are entitled to and elect to receive a refund of your contributions, this will be subject to two compulsory deductions in respect of:

national insurance contributions you should have paid and
a 20% tax deduction

UCL recommends that prior to opting out of any pension scheme you undertake to receive Independent Financial Advice.