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How Umbrella Company Workers Can Save for Retirement

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How umbrella company workers can save for retirement - Saving for retirement as a contractor can be challenging. In fact, one survey conducted in 2017 suggested as few as 27% of contractors had a pension. That means nearly three quarters were not saving for retirement.

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Shocking as this is, it’s understandable; between building your network of contacts, getting the job done and managing a variable income, contractors have enough to think about. You might also be reluctant to commit to making regular contributions to a pension, given that your income can change from one assignment to another.

This is one area where umbrella company workers have an advantage over other contractors, as auto-enrolment has given them access to workplace pension schemes. If you’re employed by an umbrella company they should have sourced an appropriate pension scheme, and should automatically enrol you onto it as long as you are:

  • Aged between 22 and state pension age
  • Working in the UK
  • Earning more than £10,000 per year

If you’re not yet saving for retirement, and even if you are, it’s worth taking a close look at your umbrella company’s pension scheme because it could have some real advantages.

You’ll be enrolled automatically

In the survey we mentioned above, one in five of those who had no pension provision said they just hadn’t got around to it. If that sounds like you, being automatically enrolled can make things a lot easier. You won’t have to do anything at all.

In our experience the impact of auto-enrolment is even greater than that, with only 10% of contractors choosing to opt out once they’re enrolled. This is a complete reversal of the results in that 2017 survey, with 90% choosing to contribute to a pension when they don’t have to arrange it themselves.  

One thing to remember is that switching umbrella company also means you’ll switch pension schemes, so if you often move from one umbrella employer to another you could end up with several pension pots. This can also mean you save less, as you may not be auto-enrolled until after the first three months of employment, which could mean a three-month gap each time you switch umbrella. This is one of many reasons why it’s a good idea to find a good, trustworthy umbrella company and stay with them through all your assignments.  

Your umbrella company will contribute to your pension

As your employer, your umbrella company must contribute to your pension, but only if you’re enrolled on their scheme. The employer contribution is currently set at 3% of your qualifying earnings (2020/21). 

Your contributions will be flexible

As we said earlier, you may be reluctant to commit to paying a fixed amount into a pension if your income varies or you can have periods when you don’t get paid.

Your umbrella company’s workplace pension scheme will be based on contributing a percentage of your qualifying earnings, so your contribution will vary depending on how much you earn and if you have a period when you don’t get paid you won’t contribute in that period.

Here’s what you can expect in terms of contributions to your pension:

Worker Contribution Employer Contribution
5% of qualifying earnings 3% of qualifying earnings

Making additional provision for yourself

Depending on your situation and when you want to retire, you might want to contribute to a personal pension in addition to your employer’s workplace pension. If you’re considering this, it’s a good idea to get specialist financial advice from someone who understands contracting so they can recommend appropriate products for you. Our longstanding partner Contractor Wealth will be able to provide just such reliable, specialist advice.

Remember your umbrella company may not contribute to your personal pension and it will be up to you to make any necessary payments from your post-tax income. Tax relief is available on pension contributions up to £40,000 per year (2021/22) with a lifetime limit of £1,055,000 (2021/22). Your advisor will be able to tell you how to arrange this.

If you’re employed by Orange Genie Umbrella

If you’re an eligible worker, we’ll enrol you onto our pension scheme the first time we pay you after you’ve been employed by us for three months. If you’d like to enrol earlier, please contact our Contractor Support team.

Once you’ve been enrolled you’ll receive a pack from our pension provider with full details of the scheme.

Our workplace pension scheme is run and administered by options and the funds are invested and managed by TAM Asset Management. We regularly review our choice of pension provider to ensure we’re doing the best we can for our employees.

You can view details of your pension from the Your Pay and Pension section of the Orange Genie Edge portal. You’ll see your contributions in the deductions column of your payslip, and our contributions in the pay calculation as one of our costs.

If you have any questions about this or any issue, please contact our expert team on 01296 468 483 or email info@orangegenie.com

What if I already have my own pension?

If you have an existing pension that you'd like to pay into either instead of, or as well as, our workplace pension scheme, you can agree to a salary sacrifice. You can decide how much salary to sacrifice and we'll make that contribution into your pension, as an employer contribution. You will still be automatically enrolled onto our workplace pension scheme and will need to follow the opt out process if you wish to. 

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