How do pensions work with an umbrella company?

If you are new to contracting or have never used an umbrella company, you may wonder how pensions work with an umbrella company. Continue reading to learn how pensions work with an umbrella company, the benefits of a workplace pension and information about salary sacrifice.

What is a workplace pension?

A workplace pension scheme is a way of saving for retirement through contributions deducted from your wages. If you are eligible for automatic enrollment, your employer must enrol you and contribute to the scheme. If you do not want to use your umbrella company’s workplace pension scheme, you can opt-out after enrolment.

How do pensions work with an umbrella company?

Once you register with an umbrella company, they will enrol you into their chosen workplace pension scheme. When enrolled, you will receive a welcome pack that provides important information about the scheme, pension deductions, and how to opt out if you do not want to contribute.

The minimum contribution the government sets is 8% – split into 5% employee and 3% employer. Most umbrella companies will follow the minimum contributions when enrolling employees into their workplace pension scheme. Pension deductions are taken automatically each time you are paid, and pension contributions are sent to the pension provider. All pension contributions are listed on your payslip.

If you are a client of Churchill Knight Umbrella, our chosen pension provider is Smart Pension. For more information, please visit Smart Pension’s website.

What are the benefits of a workplace pension scheme with an umbrella company?

Paying into a workplace pension is a straightforward way to save for retirement, as the amount is deducted and paid into your pension, and each payday, it is only a small amount. Other benefits of paying into a pension via an umbrella company include:

• It is an easy way to save – Your pension provider will take care of everything for you, so you do not need to worry about managing your retirement savings.
• Income when you retire – You’ll have guaranteed income when you retire as you’ll be paying into your pension regularly.
• Pension tax relief – The government will boost your pension contributions through tax relief. The amount of tax relief you are eligible for will depend on your income tax rate, but most UK taxpayers benefit from a 20% top-up on pension payments.
• Tax-free pension allowance – UK taxpayers can benefit from a tax-free pension allowance, which is the amount that can be paid into a pension before a tax charge applies. For the 2024/25 tax year, this is £60,000 or 100% of your total annual income (whichever is lower).
• Carry forward unused allowance – Your annual tax-free allowance renews each year, and you can carry forward any unused allowance from the previous three years.

Can I opt out of pensions with an umbrella company?

Now that we’ve outlined how pensions work with an umbrella company, it is important to mention that it is your choice to contribute to the workplace pension scheme or not. You can opt-out if you do not want to contribute to the workplace pension scheme.

You must wait until you have enrolled in the workplace pension scheme and your first pension contribution has been taken. After this point, if you would like to opt-out, you can do so. Any contributions you’ve made will be refunded if you opt out within one month of enrolment. Outside of the one-month opt-out period, you can still opt out and cease your membership, but you won’t receive a refund for your contributions.

To opt-out, please contact your umbrella company’s workplace pension provider. If you are an employee of Churchill Knight Umbrella, please contact our pension provider, Smart Pension.

Salary sacrifice is a great way to save tax-efficiently for retirement

Salary sacrifice is a great way to boost your personal pension pot significantly, or if you have additional income, you would like to save for retirement. It allows you to allocate a percentage of your pre-tax salary towards your pension. Not only will this help grow your retirement pot quickly, but contributions will also be exempt from tax and National Insurance. Additionally, employer and employee insurance contributions are reduced as your remaining salary is reduced. There is also less Income Tax due on the remaining salary.

If you would like to find out more information or request a tailored take-home pay calculation, please call our friendly team on 01707 871622. If you are an employee of Churchill Knight Umbrella, please call 01707 669026 to add salary sacrifice to your service.

Are you looking for an umbrella company?

If you choose Churchill Knight Umbrella as your payroll provider, you can access many exciting benefits. These include our dedicated Onboarding and Umbrella Customer Service Teams, Same-Day Faster Payments, and Churchill Knight Rewards if you choose to add it to your service.

Registering with Churchill Knight Umbrella is easy, and we’re here to support you every step of the way. To get started, please call our friendly Sales Consultants on 01707 871622 or complete the registration form online.