{ Umbrella Company Pension Schemes — What You Need to Know |} Pension schemes help employees put money aside for retirement straight from their own commission. The issue for self help professionals is thatthey will need to manage themselves,either by setting up a retirement strategy or saving money from their earnings. Fortunately,umbrella companies course contractors as employees,giving them all the advantages of employment. That includes a retirement scheme,which requires contribution from the umbrella company too. Let’s take a better look in the statutory retirement strategies available through umbrella companies. {In 2012,the UK Government determined that workers were not saving enough for their retirement. |} Individuals were relying on the State Pension,which hadn’t received sufficient funding to match the continuing rise in life expectancy and an ageing population. {To fight this,they introduced automatic enrolment. |} The new system,rolled from 2012 to 2018,requires companies to automatically enrol eligible employees onto a workplace retirement strategy. Employers will also be responsible for deducting contributions from their pre-tax income and creating a minimal statutory contribution to the employee’s savings. In October 2012,this minimal contribution was set to 1 percentage for employees,which was matched by companies,rising in 2018: October 2012 to 5th April 2018: companies 1%,employees 1% 6th April 2018 to 5th April 2019: companies 2 percent,employees 3 percent 6th April 2019 onwards: employers 3 percent,employees 5% But for anyone that does not need to donate to a retirement as soon as you’re enrolled it is still possible to opt out. {Working through an umbrella company,contractors are recognized as an employee. |} That means,yes,You’re automatically enrolled onto the umbrella company’s pension scheme provided that you meet the following criteria: Your job is primarily UK-based You earn more than #10,000 annually You’re between 22 and the state pension age. Until 5th April 2019,3 percent of your pre-tax wages will proceed into a retirement fund,together with the umbrella company leading to a further 2%. By 6th April 2019,5% of your pre-tax wages will go into the same pension fund,together with your umbrella company contributing a further 3%. The Advantages of an umbrella company retirement Some contractors can worry that this will eat away in their wages. Do not. {Pension contributions are made before your wages are taxed. |} That means anything which goes from your wage in your pension fund is tax-free instead of being taxed at 20% or even 40%. So,rather than getting 60 percent of your earnings,you receive 100 percent using a pension fund. Let’s say you earn more than46,351 annually,which puts you at the higher rate band of income tax. {Whatever you earn beyond that #46,351 annually (approximately #3,863 per month) is taxed at a rate of 40%. |} You receive just #60 for every #100 of income. Why don’t you put the full #100 straight into the pension fund instead? That is why many people,especially people in the higher rate band of income tax,opt to put more than the minimal in their retirement fund. And this is entirely possible. Contractors can contribute upto #40,000 for their retirement scheme each year,including tax-free income and employer contributions. At this time,there’s a lifetime allowance of #1,030,000 which can be donated before incurring any tax. With your funds {With the increased earnings of contracting,it is common for contractors to retire early. |} Alternatively,you might only wish to get some of the money out for a vacation,new car or home improvement. The good news isthat you do not need to wait till the state retirement age to get the pension funds you have built up through your umbrella company retirement. Once you’re 55 or more,you are able to get up to 25% of your pension pot as a tax-free lump sum. Anything outside the 25% will be taxed as an addition to the remainder of your earnings that tax year — either20% over #11,850,40% over #46,351 or #45% over #150,000,as things currently stand. That is why most people decide to take their retirement as regular income as soon as they’ve retired,to minimise the amount of tax paid. {Contractors who operate as a limited company can still benefit from the tax relief of a retirement scheme. |} However,as with most things regarding limited companies,this needs a lot more effort on their part. Primarilythey must get the ideal balance between wages and dividend payments to boost the limit on their retirement contributions. Because employer contributions,like pensions,count as a business cost,they’re subject to tax relief. Thus,when you donate to your retirement strategy,as a manager,the company can spend less in corporation tax. But this has added complications since it needs to be fully compliant as an allowable cost. Any other employees,by way of instance,ought to be given similar packages to prove to HMRC which it is a genuine business expense. In addition to all that,using a limited company retirement scheme entails setting up and paying to the retirement fund yourself. Along with the rest of the administrative work to get limited company owners,it is definitely worth seeking advice and assistance from a trusted accountant. Get the right help Whether you are searching to compare umbrella companies or find the right accountant,you are able to make the ideal choice with visit site. Our online comparison tool lets you assess multiple companies in a matter of minutes. It couldn’t be much easier to take the hassle out of contracting. Contact us today to learn more.