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What Contractors Need to Know About Workplace Pensions

It’s never too early to think about planning for retirement and the sooner you start, the better chance you have of funding the lifestyle you want when you retire. If you’re employed by a compliant UK umbrella company, you should have easy access to a workplace pension without having to take any action yourself – all you really need to do is go along with it.
 
Even so, it is important that you understand what’s happening and where your money is going to, so in this article we’ll explain what workplace pensions are all about.

Why save for retirement?

The state pension is no longer enough for most people and you’re going to need to make additional provision if you want to have an enjoyable and comfortable retirement.

Another reason to save is that pension savings are extremely tax efficient. You don’t pay tax on your contributions, the pension itself can grow without tax implications and at retirement you can take up to 25% of your pension pot as a tax-free lump sum, making it one of the most efficient ways to save.

The advantage of being employed

Arranging a pension is one of those tasks that people habitually put off. This is understandable; it won’t make any difference to your life for many years, and whether you do it this month, next month or even the month after that won’t actually affect the outcome very much. The problem is that habitually putting it off can lead you to wait much longer than you intended, and you might end up saving much less than you need.

That’s where being an employee can be a huge advantage, because all UK employers have to provide and contribute to a workplace pension scheme. All qualifying employees must be automatically enrolled, so you don’t actually have to do anything at all yourself.

Typically, an umbrella company will enrol employees on their pension scheme once they’ve been employed for three months, which means you might end up saving less if you often move from one umbrella company to another. If you’re eligible and you want to join straight away you will just need to inform your umbrella.

Why your umbrella company enrolled you without asking you first

You’d naturally expect an employer to require your express consent to sign you up for a pension. However, if you’re aged between 22 and state pension age and you’re earning £10,000 or more, your employer is required by law to enrol you onto their pension scheme. This is to make sure they don’t put pressure on you to opt out and save them money.

This means your umbrella company must enrol you onto their workplace pension scheme, whether you want them to or not. Once you’re enrolled you can then opt out if you choose.

Employer contributions

One of the advantages of a workplace pension is that your employer is required to contribute too, which means you save more money at a lower cost to yourself. The minimum contributions for both the employee and employer are:

  • Employee contribution, paid by you: 5%

  • Employer contribution, paid by your umbrella company: 3%

Your right to opt out

While your umbrella company is required to enrol you into their pension scheme, you are not required to contribute to it if you don’t want to. Typically, you’ll be given the chance to opt out once you’ve been enrolled.
 

However, it’s very important that you do save for your future so we strongly advise you to stay enrolled in your employer’s chosen workplace pension scheme, unless you’ve made sufficient provision elsewhere.

Even if you have your own personal pension, we’d still advise you to look in detail at your employer’s scheme before you decide to opt out of it.

If you’re with Orange Genie

If you’re lucky enough to be with employed by Orange Genie, we’ll enrol you into our pension scheme the first time we pay you after you’ve been with us for three months. If you prefer not to wait, speak to our Contractor Support team for information about how to enrol early.

We choose our pension provider with great care, and we regularly review that decision to make sure we’re doing the best we can for our contractor employees.

Use your Orange Genie Companion app

You can access the details of your pension, see how much has built up through employee and employer contributions, make decisions about how your fund should be invested and track the performance of those investments, all from the Pay and Pension section of your Orange Genie Companion app.

To download the app, just search for Orange Genie at the appropriate app store for your device. You’ll also use the app to access your pay documents and a whole host of additional benefits, so it’s an important part of your employment with us.

If you’ve arranged your own private pension scheme

As well as offering our own carefully chosen workplace pension, we can help you contribute to your choice of pension via salary sacrifice, which is an extremely cost-effective way to save.

If you have any questions or if we can help in any way, please contact our expert team on 01296 468 483 or email info@orangegenie.com

 

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