BY JOHN ELLIS, FINANCIAL ADVISOR
If you’re one of the many people who were automatically enrolled in My Future Fund earlier this year, there’s an important date coming up. From July 1 until August 31, you’ll have the option to leave the scheme if you decide it’s not right for you. After that, you won’t get another opportunity to opt out for quite some time, so it’s worth taking a few minutes now to understand how it works and whether it suits your circumstances.
My Future Fund was introduced to help workers who don’t already have a workplace pension to put something aside for retirement alongside the State Pension.
Since the scheme launched in January, hundreds of thousands of workers have been enrolled automatically. For most people, 1.5% of their gross pay is deducted through payroll each month, with employers matching that contribution and the State adding a top-up of 0.5%, helping retirement savings build up over time.
For many people, the biggest attraction is that it’s automatic. Once you’re enrolled, contributions are taken through payroll and invested on your behalf. You don’t have to fill in forms, choose funds or make complicated decisions to get started. That said, staying in the scheme won’t be the right choice for everyone.
If you decide to opt out during the July–August window, your own contributions will be refunded. The contributions already made by your employer and the State will remain invested in the fund, and no further deductions will be taken from your wages unless you choose to rejoin in the future.
I’ve been asked about My Future Fund regularly since it launched. Some people are pleased that their employer and the State are contributing towards their retirement. For those who have never had a pension before, it can also be an easy way to get started.
However, as stated, the scheme may not suit everyone. Some people may prefer a plan where they have more control over contributions and, particularly, over investment choices. Others are dealing with rising household costs, childcare expenses or mortgage repayments, and the extra deduction may simply not fit their budget right now.
A client said to me recently that the deduction was smaller than they expected once they saw it on their payslip. Another told me that, with childcare costs and day-to-day bills continuing to rise, they simply couldn’t justify any extra deduction at the moment. Both perspectives are valid and they highlight why there isn’t a single answer that works for everybody.
While the scheme is a positive step for many, it’s important not to assume it will automatically provide everything you need in retirement. Like any pension, the outcome will depend on how long you contribute, the level of contributions made and how the investments perform over time.
If you’re unsure whether My Future Fund is right for you, talk it through with someone you trust. Sometimes a quick look at your payslip and any existing pension arrangements is enough to tell you whether staying in the scheme makes sense, or whether your money would be better directed elsewhere.
Whatever you decide, make sure it’s a decision you’re comfortable with and one that reflects your own circumstances. The scheme was designed to encourage retirement saving, but it also gives people the flexibility to step away if it doesn’t suit them.
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