Inside Ir35 and pensions

[Lance]

I don't think thats correct. The pension payment is made before any deductions at all ... including Employer NI.

If what you are saying is correct then this would not make any sense :

Inside IR35? get huge tax savings with a pension

that makes sense bu is not the whole story. You can make personal contributions to a pension after taking it as salary.

EG. If I pay £100 into my pension from cash, the amount credietd to my pension fund is £120 (or £140 if I'm a higher rate tax payer).
It gets complicated when you are say £20k into the higher rate bracket and you pay over £20k into the pension as not all of it will get an extra 40%. There's a box on your SATR to complete as well so it all balances out.

[Amanensia]

If I pay £100 into my pension from cash, the amount credietd to my pension fund is £120 (or £140 if I'm a higher rate tax payer).

£125 and £166.67 respectively.

[Lance]

£125 and £166.67 respectively.

oops. My bad. As always seek professional advice

[PCTNN]

Has anybody on here had discussions with their agent (about to turn employer) and/or umbrella company about pensions when caught by Ir35?

The agents that have been talking to contractors at my place (who are all about to switch to PAYE from Jan) are all quoting that 3% of the contractors rate/pay will, by default, be paid into their company pension scheme. However, nobody seems to know whether the contractors can tell the agent that they don't want to pay this 3% (opt out if you like) and instead direct part of their money (up to £40k) into their own existing SIPP.

My current contract is inside ir35 and am working through an umbrella company.

If I remember correctly, they automatically enrolled me to their pension scheme with them contributing 3% and me contributing 5%.

When asked about redirecting all the contributions (mine and theirs) to my existing SIPP they said it was not possible but I could move the money from their scheme to my SIPP once I finished working under them.

Also had the option to opt out, which back then I did thinking I would not be working via umbrella for long. I might opt in again now that the situation has changed and it's more clear how most my future contracts will be.

[Lance]

My current contract is inside ir35 and am working through an umbrella company.

If I remember correctly, they automatically enrolled me to their pension scheme with them contributing 3% and me contributing 5%.

When asked about redirecting all the contributions (mine and theirs) to my existing SIPP they said it was not possible but I could move the money from their scheme to my SIPP once I finished working under them.

Also had the option to opt out, which back then I did thinking I would not be working via umbrella for long. I might opt in again now that the situation has changed and it's more clear how most my future contracts will be.

if you opt out you lose their 3% contribution right? Or did that get added back to salary so wasn't actually their contribution?

[Big Blue Plymouth]

but I could move the money from their scheme to my SIPP once I finished working under them.

Yes, but not all pensions are that portable. I remember one scheme I was on as a permie charged all its fees upfront so it wasn't worth moving it. Don't know how common that is but you could end up with pension pots all over the place especially if you are forced to go through the brolly of the agency's choice ( not sure in reality if that's happening though).

[Amanensia]

if you opt out you lose their 3% contribution right? Or did that get added back to salary so wasn't actually their contribution?

"Their" 3% contribution must effectively come from your end as there is nothing like enough margin anywhere else to fund it. So presumably if you opt out it just gets added back.

[Lance]

"Their" 3% contribution must effectively come from your end as there is nothing like enough margin anywhere else to fund it. So presumably if you opt out it just gets added back.

'presumably'..... I'd want to *know* before I decided to opt out. You're probably right though as umbrellas are decent honest employers.

[CryingSheep]

'presumably'..... I'd want to *know* before I decided to opt out. You're probably right though as umbrellas are decent honest employers.

I would guess that even if you opt out there is a legal minimum for the employer contributions?

I believe what happens is some employers have a optional pension contribution match. For example employer A will match employee pension contributions up to 5%:

Employee Employer
0%/Opt-out 3%
1% 3%
2% 3%
3% 3%
4% 4%
5% 5%
+6% 5%

So employer will at least contribute the legal minimum 3% and will match employee contributions up to 5%.

Not sure this is how it works, but was the idea I got...

[Lance]

I would guess that even if you opt out there is a legal minimum for the employer contributions?

I believe what happens is some employers have a optional pension contribution match. For example employer A will match employee pension contributions up to 5%:

Employee Employer
0%/Opt-out 3%
1% 3%
2% 3%
3% 3%
4% 4%
5% 5%
+6% 5%

So employer will at least contribute the legal minimum 3% and will match employee contributions up to 5%.

Not sure this is how it works, but was the idea I got...

Nope.
If you're not enrolled they don't have to contribute.

When you’re enrolled into their pension scheme, your employer must:

pay at least the minimum contributions to the pension scheme on time

Workplace pensions - what your employer can and can't do - GOV.UK



In fact think about it..... if you're not enrolled where would they contribute it to???