Can I opt out of pension contributions when using an umbrella company?

As an umbrella company employee, you are enrolled into a workplace pension scheme. Continue reading to learn more about workplace pension contributions and how to opt out of pension contributions when using an umbrella company.

What is a workplace pension scheme?

It is a legal requirement for all employers in the UK to provide and enrol their employees into a workplace pension scheme. This is called ‘automatic enrolment’. You will be enrolled into the umbrella company’s workplace pension scheme if any of the following apply:

• You are classed as a worker
• You are aged between 22 and state pension age
• You earn £10,000 a year or more
• You usually work in the UK – more information is available on the government’s website

If you would like to make pension contributions when using an umbrella company, the minimum contribution set by the government is 8% – 5% employee and 3% employer. Most umbrella companies will follow the minimum contributions when enrolling employees into their workplace pension scheme.

Can I opt out of pension contributions when using an umbrella company?

Yes, it is entirely your decision whether to contribute to the umbrella company workplace pension scheme or opt-out if you do not want to contribute.

If you want to opt out of pension contributions when using an umbrella company, you must first be enrolled in the workplace pension scheme. You can opt-out after your first contribution. The opt-out period is one month from the date you are enrolled. If you opt-out within one month of enrolment, you’ll receive a refund of any contributions you’ve made. Outside of the one-month opt-out period, you can cease membership but won’t receive a refund of your contributions.

To opt out, please get in touch with your workplace pension provider. If you are an employee of Churchill Knight Umbrella, please contact our pension provider – Smart Pension.

Have you considered salary sacrifice?

If you want to opt out of pension contributions when using an umbrella company but still want to save for retirement, you may be interested in salary sacrifice.

Churchill Knight Umbrella offers all employees a pension salary sacrifice service for an additional charge. It is an entirely voluntary service, and if you are interested, contributing more to your pension via salary sacrifice is a great way to save tax-efficiently for retirement and increase the contributions to your personal pension pot.

Just like auto-enrolment workplace pension contributions, you can receive tax relief and save up to £60,000 per tax year or up to 100% of your annual earnings—whichever is lower. You can also carry forward unused allowances from previous years.

However, with a workplace pension scheme, you are limited to the minimum contribution amounts, but with salary sacrifice, you can choose how much of your pre-tax salary you contribute to your pension.

There are many benefits to using a salary sacrifice service:

• Employers and employees pay less tax – As part of the salary is sacrificed and paid into the pension, the employer (umbrella company) and the employee (the contractor) pay less National Insurance Contributions on the remaining salary. The employee also pays less Income Tax.
• Increased take-home pay – Depending on the amount you choose to sacrifice and the tax due on your remaining salary, you may increase your take-home pay.
• Grow your pension fund faster – Sacrificing part of your salary for a higher pension contribution each week/month will allow you to grow your pension pot much quicker and save tax-efficiently for retirement.
• Extra pension tax relief – Salary sacrifice contributions are not subject to Income Tax or National Insurance Contributions. This provides better tax savings than a workplace pension scheme, as any contributions made to a workplace pension scheme will only receive tax relief at the highest rate of Income Tax that you pay.

Please call 01707 871622 to learn more about our salary sacrifice service or to add it to your payroll.

Contact Churchill Knight Umbrella today

Are you interested in joining Churchill Knight Umbrella? Churchill Knight Umbrella is an FCSA-accredited and SafeRec-certified umbrella company providing contractors and freelancers with a compliant payroll service. Since we launched in 2017, we have quickly become one of the most popular umbrella companies in the UK, and we help thousands of contractors get paid each month.

If you want to learn more about Churchill Knight Umbrella or would like to register for our umbrella service, please call us on 01707 871622. You can also request a take-home pay illustration to find out how much you could take home.