Umbrella company pensions in a snapshot

Umbrella company pensions in a snapshot

When you join an umbrella company, you must understand how umbrella company pensions work – so you don’t end up contributing when you didn’t intend to. This article will look into umbrella company pensions and how they work. Hopefully, this blog covers all bases!

Umbrella companies are legally required to enrol you into a pension

When you join an umbrella company, they legally become your employer. As an employer, umbrella companies are legally required to enrol their employees into a pension scheme within 12 weeks. While this may be annoying – it’s the law, and umbrella’s must do this to act in accordance with HMRC’s rules and regulations.

The team at enjoy reading online reviews of the major umbrella companies in the UK. It’s fair to say that many negative reviews relate to pension contributions. Either the umbrella companies haven’t explained pensions adequately, or the contractors haven’t taken pensions onboard properly. Either way – it’s best to understand how umbrella company pensions work before you join an umbrella – to avoid any unwelcome surprises.

Opting out must be done by contacting the pension provider – not the umbrella company

Some contractors and freelancers welcome the opportunity to start contributing towards a pension with an umbrella company. However, they’re not for everyone.

Opting out of pension contributions when using an umbrella company is easy, but it must be done by contacting the pension provider. The umbrella company cannot remove you from the pension scheme you’ve been enrolled to. Instead, you should be sent the relevant contact information by your umbrella. If you want to opt out of pension contributions, check and see if you’ve received information on how to do this from your umbrella company. If you haven’t, you may decide to ask your umbrella for the pension provider’s contact information or seek it yourself (it shouldn’t be hard to find online).

Again, the following may sound frustrating, but it’s the way things are. You can opt out of the pension scheme – but only after you’ve made your first contribution. Don’t worry, though. Your first contribution will be refunded by the pension provider – providing you opt out within 30 days of your auto-enrolment.

Umbrella companies exist to process the payroll of their employees. In exchange, employees are subjected to the umbrella company’s margin each payment frequency. Therefore, umbrella employees are required to contribute both the employee’s pension contribution (5%) and the employers pension contribution (3%) – totaling 8%.

Salary sacrifice with an umbrella company

Salary sacrifice for pensions allows employees to contribute higher amounts towards a personal pension pot, and there are plenty of benefits to doing this. Pension contributions are not subjected to tax or National Insurance. Therefore, by contributing more than the standard employee contribution (5%), salary sacrifice is an excellent way to save money for retirement – tax-efficiently.

Salary sacrifice with an umbrella company isn’t going to appeal to everyone. If you are interested in tax-efficiently saving for retirement, have a look and see which umbrella companies can help you. Salary sacrifice with an umbrella company is available, but only a select few offer this as a service.

Umbrella company pensions checklist

Before you register with an umbrella company, take the following into consideration.

  • Umbrella companies are legally required to enrol you into a pension. If they didn’t do this within 12 weeks – they would be acting unlawfully. It may be frustrating and extra administration for you, but it’s unavoidable.
  • Who is the preferred pension provider of the umbrella company?
  • When will you be auto-enrolled?
  • How do you opt out?
  • What are the relevant contact details for your pension provider?
  • Does the umbrella company offer salary sacrifice for pensions?
  • Do you have any unanswered questions about pensions with an umbrella company? If you do, please ask your preferred umbrella company.
  • Is the umbrella company you’re interested in accredited by either the FCSA or Professional Passport? FCSA and Professional Passport accredited companies have proven they operate compliantly and in the best interests of their employees. Therefore, we recommend you use an accredited umbrella company.

Top 10 umbrella companies

Are you interested in finding an umbrella company deal like no other? Please check out our top 10 umbrella companies. Not only are they all compliant with HMRC rules and regulations, but some have special offers! You’ll thank us later!

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