How can umbrella claim tax from pension?

[Hemingfield]

Hi

Reading the blurb from a popular umbrella they claim that going through them you add £100 to the pension but only have to cough up £60 (or something like that) and the rest comes from some tax twist. They claim it to be a 'special arrangment' with their pension providers.

I take it they just add it to the salary before the corp tax is calc'ed? In which case it would apply to any pension scheme.

Thanks

Hem

[ferret]

Maybe something to do with a group employer pension and contracting out of the State Second Pension / State Earnings Related Pension Scheme or whatever it is?

I did this when a permie and get a similar arrangement where I pay in £50 or £60 and the Government add something similar. So long ago that I cannot remember. So I am still contracted out and when the yearly letter comes to tell me this I do not know whether I should keep this arrangement or not. Anyone here got a clue?

[Gonzo]

This sounds like any pension arrangement to be honest. If it is coming from salary, the amount contributed to the pension is not taxed at all. So that is worth 40% for a higher rate tax payer.

It is possible for employer schemes to contract out of the State Second Pension, which will result in lower NI contributions being made by the employer and the employee. It is generally considered a bad idea these days to be contracted out, but that is under the current rules and who can say what the pension arrangements will be by the time we get to retire - my view, and I could be wrong, is that it is better to get the money out of the government's hands rather than contribute to a scheme that will probably not be in place when I get to retire.