pensions for contractors ... no brainer? pensions for contractors ... no brainer? - Page 2
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  1. #11

    Super poster

    Join Date
    Dec 2008


    If caught by IR35, LtdCo contributions into pensions are a humungeous no-brainer as you save an extra 20%-odd on the NI portions.

    For inside IR35, it isn't quite so cut and dry, but probably still a good thing for the arguments listed above.

    The biggest argument for ISA's is that you have total access to your money. With a pension, you have to kiss goodbye to anywhere between 30%-75% of the capital (depending on your draw-out strategy), although you do get the income on that capital.

  2. #12

    More time posting than coding

    Join Date
    Nov 2007


    how does the draw-out strategy work?

  3. #13

    Tanya@SC Lee Accountant Ltd



    You could have tax relief if you have a pension from the company.

    Quote Originally Posted by hgllgh View Post
    If you compare the net result of pension and ISA investment its approx the same:-

    As an illustration lets assume an investment gain of 30% for a basic taxpayer.

    £78 net invested gives an investment of £100
    Increase by 30% goes to £130
    Now if the income is taxed at basic rate...
    £130 becomes effectively £101.40

    £78 net invested in an ISA
    Increase by 30% goes to £101.40

    So for a contractor a pension is a no brainer as you don't get the following with an ISA ...

    [1] pension tax relief at 22% going in but pay nothing or just 10% coming out (for income below 10K per year)

    [2] reduces your corporation tax liability without affecting the amount of tax/ni contributions

    [3] You get 25% tax free lump sum on retirement

    I'm not saying contractors shouldn't have ISA's ... but we should have a pension preferably a SIPP?

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