Why choose a workplace pension scheme?
Your pension as a contractor
As a contractor or freelancer, the topic of private pensions can be something of a minefield. Did you know that, as an umbrella contractor, it can prove far more beneficial in the long-run to enrol onto a ‘workplace pension’, such as the Danbro One scheme?
With a workplace pension, you’re able to start building up a fund that will boost yours and your family’s finances in later life. What’s more, by working through an umbrella company, you can gain certain pension-related tax advantages. So, what is a workplace pension, and how can you benefit as an umbrella company contractor?
What is a workplace pension?
The majority of people in the UK receive a state pension when they reach the state pension age. This is currently 65, increasing to 66 by October 2020.
However, many people also use a private pension fund to save some extra pennies. By law, employers must now offer a workplace pension scheme. For which, enrolment for those who are eligible is automatic. Though, you’re entitled to opt out of the scheme at any time.
Arranged by your employer, a workplace pension is a common way to save for your retirement. You might have heard them referred to as ‘occupational’, ‘company’, or ‘work-based’ pensions.
Many schemes provide extra benefits, such as support for your partner in the event of your passing. You might also get tax relief on a workplace pension.
Once enrolled, every time you get paid, a percentage of your pay gets deducted and put into a workplace pension scheme.
It's a legal requirement for employers to offer a workplace pension. Your employer must then add money into the same scheme for you.
In general, you’re entitled to take up to 25% of your pension fund as a tax-free lump sum. You may take the balance in any way that suits you.
Anything you withdraw over that 25% threshold will get treated as income and is liable to Income Tax at your highest rate.
You do not need to retire from work to draw on your pension fund. You’re entitled to do this at any time from the age of 55 onwards.
Note, though, that if you decide to take your pension earlier than expected the benefits you receive may not be as high as first anticipated.
This is due to a reduction in the length of time that you’ve invested funds into the scheme.
How do workplace pensions work?
Am I eligible for a workplace pension?
Yes, you are eligible for a workplace pension if:
£118 per week
£512 per month
Different workplaces offer different workplace pensions.
At Danbro, we offer our umbrella contractors the Danbro One pension scheme. Find out more below. Or, for more information about pensions and long-term financial planning in general, check out our dedicated financial planning website.
You should receive information about the workplace scheme/s you’re entitled to join within the first two months of starting a new job. If not, contact your HR department.
Your employer is not obliged to contribute to your pension if your earnings amount to the following:
You're classed as a 'worker' and work in the UK
You're not already enrolled in another workplace pension
You earn more than £10,000 per annum
The Danbro One Pension Scheme
The Danbro One scheme is a workplace pension. It provides a tax-efficient way to save for your retirement, giving you control over your plan. The scheme benefits from low charges.
Therefore, it’s likely to give you better value for money than, say, a Personal or Stakeholder Pension.
The benefit structure of our pension scheme is very flexible.
It’s set up in such a way that you’ll receive a tax-free lump sum, as well as pension income during your retirement.
How does the Danbro One Pension scheme work?
We’ll collect the minimum contributions each payday and forward them to the Danbro One scheme on your behalf. Furthermore, if you’d like to join the scheme before your automatic enrolment, you may do so.
Have been with Danbro for 12 weeks
Earn at least £192 per week / £10,000 per annum
You are aged between 22 and the current state pension age
Your enrolment to the Danbro One pension scheme is automatic.
How much will I pay into the scheme?
On automatic enrolment, your contributions are set at 8% of your earnings. These will be split as follows:
Moreover, you can make personal contributions of any amount into the scheme which, as an umbrella contractor, will be more efficient in relation to Tax and NI.
3% employer’s contributions. This gets deducted from your gross earnings to provide tax and NI savings. The maximum contribution is £25.32 per week.
5% employee’s contributions. This gets deducted from your net earnings. The max contribution is £42.20 per week.
Your maximum lifetime allowance is £1m. The more money you input into your plan, the greater the benefits are, come your retirement. With the Danbro One pension scheme, you can increase or decrease your contributions whenever you like. So long as your minimum contributions are being paid into the scheme.
These are subject to the maximum contribution level which is:
• 100% of earned income
• £40,000 per annum
… whichever is lower.
Are there any costs or charges associated with the scheme?
We’ve negotiated a reduction in the Danbro One scheme’s charges to the following:
• A contribution charge of £3.00 per month.
• An annual ‘management and investment’ charge of only 0.3% of the value of your fund.
You may switch your contributions and existing funds at any time. It’s your responsibility to choose the appropriate funds and your choice should take into account various factors, such as:
• Your attitude to investment risk
• The length of time your funds will get invested
• Whether you take an active interest in investment matters
You can use your online portal to provide notice that you wish to switch between funds.
Danbro's Umbrella Company Benefits
We’re committed to ensuring we do right by our clients, supporting your career as much as we can. So, with Danbro, you’ll get a whole host of exclusive benefits, to make your introduction to umbrella as comfortable and stress-free as possible.
This includes continuity of employment, outstanding HR support, free take-home pay calculations, and help finding new contracts.
As well as the Danbro One pension scheme, you’re also entitled to:
• BUPA Cash Plan*
• Danbro Rewards
• Weekly / monthly payments
• Statutory employment rights
• Exclusive online timesheet portal
• No set-up or exit costs
• Dedicated customer care team
• Business insurance*
What’s more, IR35 does not apply to umbrella company clients.
With Danbro, you’re covered, supported, and protected. To find out more, contact our specialist team today.
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