Pension payments and IR35

[MrC]

FYI I contacted several umbrellas to find out the pension situation and only Liberty Bishop so far has offered to salary sacrifice directly into my SIPP.

contact paystream -they will do it for £3.60/wk

[DeludedKitten]

That's interesting - but why wouldn't you go with Liberty Bishop for every gig in that case? Then there won't be a separate pot for each gig - unless you're implying that agencies are going to force us to use a nominated Umbrella Co?

Many agencies have an approved supplier list that limits the choice of umbrella company. SOme agencies own their own umbrella so would force you into using that one.

[Paralytic]

£10 pw is £500p is ridiculous. Agree umbrellas need to up their game

NASA Group (FSCA accredited) also allow pension payments into your own plan. Their margin is £5 more per week if you do this (£22.50 rather than £17.50), but that £1,170 per annum, which is only £50 per annum more than the ones mentioned regularly here that charge £95/month and only allow contributions into their partner pension scheme (eg, Nest, Scottish Widows)

I've no connection with NASA Group, and am not a client of theirs, but have been looking at the market with a view to next year. The above is based on an illustrative quote I received from them.

The one learn I've had from this process is don't always trust what you read here; just because someone has 1,000s of posts to their name, it doesn't mean they are correct - their information may be out of date. If you read many of the posts here, you'd think there were only 2 Umbrellas that allow salary sacrifice pensions.

[coder]

It is worth salary sacrificing if you go via an umbrella so that you get the employer's NI relief (which you can't claim back if you contribute using post taxed income). You would claim back the PAYE via your self-assessment but that is obviously delayed by a year or two depending on when you contributed.

FYI I contacted several umbrellas to find out the pension situation and only Liberty Bishop so far has offered to salary sacrifice directly into my SIPP. That would cost an extra £10 per week which is a bit steep but probably still worth it rather than having a crappy NEST pension via the umbrella. A few others confirmed that you could only salary sacrifice into their pension (mostly NEST).

I do think that agencies and umbrellas are going to have to be more flexible in this regard - you don't want a separate pension pot for each gig. Granted you can close them down and transfer at the end but would prefer not to do that in the first place.

£10 pw is £500p is ridiculous. Agree umbrellas need to up their game

[Martin Bank Holiday]

It is worth salary sacrificing if you go via an umbrella so that you get the employer's NI relief (which you can't claim back if you contribute using post taxed income). You would claim back the PAYE via your self-assessment but that is obviously delayed by a year or two depending on when you contributed.

FYI I contacted several umbrellas to find out the pension situation and only Liberty Bishop so far has offered to salary sacrifice directly into my SIPP. That would cost an extra £10 per week which is a bit steep but probably still worth it rather than having a crappy NEST pension via the umbrella. A few others confirmed that you could only salary sacrifice into their pension (mostly NEST).

I do think that agencies and umbrellas are going to have to be more flexible in this regard - you don't want a separate pension pot for each gig. Granted you can close them down and transfer at the end but would prefer not to do that in the first place.

That's interesting - but why wouldn't you go with Liberty Bishop for every gig in that case? Then there won't be a separate pot for each gig - unless you're implying that agencies are going to force us to use a nominated Umbrella Co?

[CandiceMarie]

It is worth salary sacrificing if you go via an umbrella so that you get the employer's NI relief (which you can't claim back if you contribute using post taxed income). You would claim back the PAYE via your self-assessment but that is obviously delayed by a year or two depending on when you contributed.

FYI I contacted several umbrellas to find out the pension situation and only Liberty Bishop so far has offered to salary sacrifice directly into my SIPP. That would cost an extra £10 per week which is a bit steep but probably still worth it rather than having a crappy NEST pension via the umbrella. A few others confirmed that you could only salary sacrifice into their pension (mostly NEST).

I do think that agencies and umbrellas are going to have to be more flexible in this regard - you don't want a separate pension pot for each gig. Granted you can close them down and transfer at the end but would prefer not to do that in the first place.

[Martin Bank Holiday]

It does make a big difference - company contributions come off you profits and you don't loss NI (both employee and employer NI).

A company contribution is truly gross. A personal contribution paid from funds that you received as salary is not really fully gross, as the company will have borne Employer's NI on the salary, which you can never get back. This is why salary sacrifice schemes are often offered to employees, as it effectively converts an employee's contribution to a company contribution and avoids the NI.

Noted. Thanks.

[Amanensia]

A company contribution is truly gross. A personal contribution paid from funds that you received as salary is not really fully gross, as the company will have borne Employer's NI on the salary, which you can never get back. This is why salary sacrifice schemes are often offered to employees, as it effectively converts an employee's contribution to a company contribution and avoids the NI.

[eek]

From the HMRC website


So it makes no odds from a tax efficiency point of view if the contribution is a company contribution (or equivalent) or a personal contribution other than, as far as I can see, you have to claim back the tax relief on any amount you paid higher rate tax on when it's a personal contribution.

It does make a big difference - company contributions come off you profits and you don't loss NI (both employee and employer NI).

[Martin Bank Holiday]

From the HMRC website

You earn £60,000 in the 2019 to 2020 tax year and pay 40% tax on £10,000. You put £15,000 into a private pension. You automatically get tax relief at source on the full £15,000.

You can claim an extra 20% tax relief on £10,000 (the same amount you paid higher rate tax on) through your Self Assessment tax return.

You do not get additional relief on the remaining £5,000 you put in your pension.

So it makes no odds from a tax efficiency point of view if the contribution is a company contribution (or equivalent) or a personal contribution other than, as far as I can see, you have to claim back the tax relief on any amount you paid higher rate tax on when it's a personal contribution.

[northernladuk]

I'm not sure why? Many permies have their pots spread out as they change jobs. Just check the exit fees but transferring it in to you main pot is a doddle.

[Martin Bank Holiday]

I've been making contributions to a company pension scheme over the last 10 years. It's my understanding that if I get forced to use an umbrella company (if I'm IR35 caught) I may be able to make pre-deduction contributions (and therefore be tax efficient) but not necessarily to my existing provider but to whatever provider the umbrella co has avalable.

Don't particularly want my pension spread over several pots so I'm wondering how it would compare to make a personal contribution to my existing scheme instead. My understanding is that for every £100 that I contribute, the taxman pays £20 so a net payment would be £120 (or so).

I'm guessing the personal contribution approach is less tax efficient? Is there a limit I can put in and, if I say, contribute £50,000 in one year, withh the taxman put in 40p in the pound for everything over the higher rate threshold?