Invest in SIPP pension via umbrella company for small fee or do this privately?

[Madmax86]

Hi all

I am currently contracting inside IR35 via an umbrella company (Workwell).

I've been auto-enrolled into NEST pensions and currently make the minimum required pension contributions.

By the end of the tax year, I am on track to go over the £100k mark so in order to avoid paying more tax, I want to sacrifice some of my salary into a pension.

Question is what is the best way to do this...

1. Leave my NEST pension as it is and just privately pay into a SIPP as and when I need to. I assume the GOV then tops up 25% of whatever I put in.
2. Tell my Umbrella company that I want to opt out of NEST and get them to pay into my private pension. They do offer this but there is a £7.50 weekly margin cost to do so. I currently have a £15 weekly margin so this would increase to £22.50. For this, I would be able to make a larger contribution and I assume the added benefit of this approach as opposed to the first one is additional savings in Employers NI.

So my question... Is the additional margin of approx £30/month worth it to contribute to a SIPP of my choice via my umbrella company or should I just leave my auto-enrolled NEST pension as it is and invest privately. Tax relief seems to be similar for both routes, I believe it is just the Employers NI I would benefit from.

Pretty new to pensions in general so any advice would be greatly appreciated.

[borisbike3]

Hi all

I am currently contracting inside IR35 via an umbrella company (Workwell).


Pretty new to pensions in general so any advice would be greatly appreciated.

Nest is a good pension scheme I believe so you are ok there but check how your funds are invested.

Having the umbrella pay into your pension should imply they do this via Salary Sacrifice.

This means the money is paid in gross from the agency payment therefore lowering your employers' national insurance bill plus your PAYE.

I.e., you are getting 4k gross from agency, and put in 1000 per month to pension then your taxable income is 3000/per month.

For people closer to retirement it's likely they will be putting in max pension contribs so Salary Sacrifice tax savings become significant.

If you paid pension out of your net income (after taxes) you lose these benefits.

[eek]

If you paid pension out of your net income (after taxes) you lose these benefits.

Any personal pension contribution is after employer NI has been dedicated so you really want it to come via salary sacrifice and check that all 14.3% that was saved is going to your pension fund.