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Pensions Auto-Enrolment – A Contractor's Guide

In 2012 the UK Government introduced new legislation making it compulsory for employers to provide a workplace pension for their employees. The process started with the country’s largest employers in October 2012 and continued until 2018, when all UK employers were included.

The aim is that all employees should have access to a workplace pension scheme, and it applies to all employees over 22 years of age and earning over £10,000 a year.

At the moment, your employer has to contribute a minimum of 3% of your qualifying earnings. You have to contribute at least 5%.

Anyone under the age of 75 and living in the UK can contribute to a pension. As the state pension will be worth only £179.60 per week it’s advisable to make additional provision, and a workplace pension may be the ideal opportunity to do so.

How does this affect contractors working through agencies?

If you work for a recruitment agency the rules still apply, so your agency is required to offer a workplace pension. If you work for more than one agency, each one of them may be required to enrol you, so you could end up saving in several different pension pots. This is not an ideal situation for many contractors.  


If you’re employed by an umbrella company

If you work for an umbrella company such as Orange Genie Umbrella you won’t have this issue. You’ll be employed by the umbrella company, not the agency, so you can work on many assignments through many different agencies and still only have one employer. The responsibility to offer a workplace pension falls on the umbrella company, so you’ll only have one pension pot. This is one of several ways that working through an umbrella company can simplify a contractor’s finances and make them more efficient.

If you’d rather arrange your own pension

It’s possible that the scheme your employer is offering is not right for you, and if this is the case you should feel free to make your own arrangements. However, your employer has a legal obligation to enrol all qualifying employees, so once you meet the criteria they will have to enrol you. Once you’ve been enrolled you should then have the option to opt out. The particular scheme may have a deadline for this, so you should make sure you read all the information your employer, or the pension provider, send you.   

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