When you’re focused on your career, especially in your younger years, retirement can feel like a distant concern. Yet, many people find that the state pension alone isn’t enough to support their desired lifestyle in retirement. This is where auto-enrolment and salary sacrifice contributions come into play, helping umbrella workers save for a financially secure future. Here’s a comprehensive guide to your pension options when joining an umbrella company.

Auto-Enrolment: The Basics

Upon joining an umbrella company, like with any employer, you will be asked to join their workplace pension scheme, introduced by the Government to help save for the future. The employer sets up a pension scheme and then pays into it together with the employee through automatic deductions. If you wish to opt out, you can, of course.

Benefits of Auto-Enrolment

• Employer Contributions: Your employer contributes to your pension, providing “free money” to grow your retirement savings.
• Government Tax Relief: Contributions benefit from tax relief, effectively doubling what you pay in.
• Financial Security: By saving consistently, you can build a sufficient retirement fund to maintain your lifestyle after leaving the workforce.
• Easy Monitoring: Online tools let you track your contributions and see how your pension pot is growing.

Eligibility for Auto-Enrolment

You’ll automatically be enrolled if you:

• Are at least 22 years old.
• Are under the state pension age.
• Earn more than £10,000 per year (£833 per month or £192 per week).
• Usually work in the UK.

How Contributions Are Calculated

All contributions to the plan are based on a percentage of your qualifying earnings. Qualifying earnings is a band of earnings most employers use to calculate contributions.

The figures are reviewed annually by the government. For the 2025/26 tax year, the range is £6,240 to £50,270 per year. We contribute a percentage of our workers’ gross annual earnings that fall between these figures. The first £6,240 isn’t included, so qualifying earnings can’t be more than £44,030 (£50,270 minus £6,240). For example, if a worker earns £20,000, their qualifying earnings would be £13,760.

Opting Out of Auto-Enrolment

If you prefer not to participate, you can opt out within a month of joining and receive a refund of your contributions. You can also opt out later, but your contributions will remain in your pension account.

Self-Invested Personal Pension (SIPP)

In addition to workplace pensions, umbrella workers can explore Self-Invested Personal Pensions (SIPPs) as a flexible and tax-efficient way to save for retirement.

What Is a SIPP?

A SIPP allows you to manage your pension contributions independently, giving you control over where your money is invested. Contributions are made via salary sacrifice, reducing your taxable income and saving on both employee and employer National Insurance contributions.

Benefits of a SIPP

• Flexibility: Choose how much to contribute and manage investments yourself.
• Portability: Take your SIPP with you if you switch employers.
• Tax Advantages: Contributions are made pre-tax, lowering your tax and National Insurance liabilities.
• Growth Opportunities: Invest in a wide range of assets to grow your savings faster.

Important Considerations

• Contributions can’t reduce your earnings below the minimum wage.
• Lower taxable income may affect mortgage or life insurance applications.
• Opting out of a SIPP later means repaying National Insurance savings through salary adjustments.

SmartWork Pension Options

At SmartWork, we offer both auto-enrolment and SIPP contributions to meet your financial goals.

Workplace Pension: Auto-Enrolment with The People’s Pension

We’ve partnered with The People’s Pension, a trusted non-profit provider supporting thousands of UK businesses. Working with them, we made sure that our automatic enrolment process was simple and seamless.

SIPP Contributions: Flexibility and Control

We are happy to facilitate contributions to our contractor’s Private Pension fund (SIPP) in addition to our payroll service.

If you haven’t got a SIPP account yet, we can help. We teamed up with “Which” recommended SIPP providers Interactive Investor to offer a convenient way to set up an account for our workers. You can find more information by visiting this link.

We strongly recommend you read our guidance on our Knowledge Base before deciding to ensure this fits your personal situation. 

Dedicated Support

Every SmartWork contractor benefits from a dedicated business manager, ready to answer any questions and help you navigate your pension options.

Get in Touch

SmartWork is here to support your financial future. For more information about auto-enrolment or SIPP contributions, contact us at info@smartwork.com or call 0800 434 6446 to speak with one of our business managers.

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