Appropriate Financial Debt Recovery Enforcement Can Help Businesses Boost Their Money Flow

Umbrella Company Pension Schemes – What You Need to Know

Pension schemes help employees put money aside for retirement directly from their wage. The problem for self-employed professionals is that they need to manage this themselves,either by setting up a pension scheme or saving money from their income.

Fortunately,umbrella companies class contractors as employees,giving them all the benefits of employment. That includes a pension scheme,which now requires contribution from the umbrella company too. Let’s take a closer look at the statutory pension schemes available through umbrella companies.

Auto-enrolment pensions

In 2012,the UK Government decided that workers weren’t saving enough for their retirement. People were relying too much on the State Pension,which had not received adequate funding to match the continuing rise in life expectancy and an ageing population.

To combat this,they introduced automatic enrolment. The new system,rolled out from 2012 to 2018,requires employers to automatically enrol eligible employees onto a workplace pension scheme. Employers are also responsible for deducting contributions from their pre-tax income and making a minimum statutory contribution to the employee’s savings.

In October 2012,this minimum contribution was set to 1 percent for employees,which was matched by employers,rising in 2018:

• October 2012 to 5th April 2018: employers 1%,employees 1%
• 6th April 2018 to 5th April 2019: employers 2%,employees 3%
• 6th April 2019 onwards: employers 3%,employees 5%

However for anyone that doesn’t want to contribute to a pension once you’re enrolled you can still opt out.

Umbrella company pension scheme

Working through an umbrella company,contractors are classed as an employee. That means,yes,you are automatically enrolled onto the umbrella company’s pension scheme as long as you meet the following criteria:

• Your work is primarily UK-based
• You earn more than £10,000 per year
• You’re between 22 and the state pension age.

Until 5th April 2019,3% of your pre-tax salary will go directly into a pension fund,with the umbrella company contributing a further 2%. From 6th April 2019,5% of your pre-tax salary will go into the same pension fund,with your umbrella company contributing a further 3%.

The benefits of an umbrella company pension

Some contractors may worry that this will eat away at their wages. Don’t. Pension contributions are made before your wages are taxed. That means anything that goes from your wage into your pension fund is tax-free rather than being taxed at 20% or even 40%. So,instead of receiving 60% of your income,you receive 100% via a pension fund.

Let’s say you earn over £46,351 per year,which puts you in the higher rate band of income tax. Anything you earn beyond that £46,351 per year (roughly £3,863 per month) is taxed at a rate of 40%. You get just £60 for every £100 of income. Why not put the full £100 straight into the pension fund instead?

That’s why many people,especially those in the higher rate band of income tax,choose to put more than the minimum into their pension fund. And this is entirely possible. Contractors can contribute up to £40,000 to their pension scheme per year,comprising tax-free income and employer contributions. Currently,there is a lifetime allowance of £1,030,000 which can be contributed before incurring any tax.

Using your funds

With the increased earnings of contracting,it’s common for contractors to retire early. Alternatively,you might simply want to get some of the money out for a holiday,new car or home improvement. The good news is: you don’t have to wait until the state pension age to access the pension funds you’ve built up through your umbrella company pension.

Once you’re 55 or over,you can access up to 25% of your pension pot as a tax-free lump sum. Anything beyond the 25% will be taxed as an addition to the rest of your income that tax year – either 20% over £11,850,40% over £46,351 or £45% over £150,000,as things currently stand. That’s why most people choose to take their pension as regular income once they have retired,to minimise the amount of tax paid.

What about limited companies?

Contractors who operate as a limited company can still benefit from the tax relief of a pension scheme. However,as with most things relating to limited companies,this requires a lot more effort on their part. Firstly,they have to get the right balance between salary and dividend payments to increase the limit on their pension contributions.

Because employer contributions,such as pensions,count as a business expense,they are subject to tax relief. So,when you contribute to your pension scheme,as a director,the company could save money in corporation tax.

However,this has added complications because it needs to be fully compliant as an allowable expense. Any other employees,for example,should be given comparable packages to prove to HMRC that it is a genuine business expense.

On top of all that,using a limited company pension scheme means setting up and paying into the pension fund yourself. Along with all the other administrative work for limited company owners,it’s definitely worth seeking advice and assistant from a trusted accountant.

Get the right assistance

Whether you’re looking to compare umbrella companies or find the right accountant,you can make the right choice with -. Our online comparison tool lets you assess multiple companies in a matter of minutes. It couldn’t be easier to take the hassle out of contracting. Contact us today for more information.

Black Gospel Music Artists

There are hundreds of gospel music artists,but only a handful has changed the way people listen to the music,understand it and enjoy it. These artists have successfully blurred the lines of musical genres and led to the birth of a generation that enjoys music of all types. Who are some of the famous Black Gospel musical artists that have made their mark in the world?

Aretha Franklin – This well-known American singer was also a pianist,actress and civil rights activist. Her career in Soul originated from the Gospel music she was exposed to as a child in the church. Her father was a minister at the New Bethel Baptist Church in Detroit,where she started her singing career. Although it took time for her career to take off,she eventually became known as the “Queen of Soul.”

Thomas Dorsey – This well-known American singer was also a huge Christian evangelist influence on the foundation of 20^th-century gospel music. As a child of a religious family,he gained more of his fame by playing blues at Atlanta’s parties and barrelhouses. However,Dorsey experienced a spiritual awakening that caused him to write and sing religious and Gospel music. He noted no difference between church music and blues and saw Gospel music as a supplement to word preaching.

Sister Rosetta Tharpe – She was an American recording artist,singer,songwriter and guitarist,who gained popularity throughout the 30s and 40s for her gospel recordings. She blended the spiritual lyrics and rhythms,pioneering the Rock & Roll musical genre. Tharpe is known as a “Grandmother of Rock & Roll,” and she was one of the first Gospel musicians to be accepted by a wider audience.

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