Putting away enough money for later years to ensure a life of comfort is a task that every worker, operating in any form of employment, should do. If you haven’t given it a thought already, it is probably time to sort this out. To put an end to this worry – the UK government introduced an automatic pension enrolment scheme in October 2012.
This makes it compulsory for employers to automatically enroll all eligible employees in a pension scheme and also provide them the option to opt out, if they wish to. The scheme is expected to be operational across all firms by 2018.
As a contractor operating under this mode of employment, you are seen as the employee of that company and are automatically enrolled in a pension scheme by your employer. You are also given the option to opt out if you want to.
How the scheme applies to contractors depends totally on the structure of their limited company, number of directors and whether or not the company has any employees.
The scheme will not apply here because the directors can’t be classified as employees as they are not working under any contract of employment. And even if one of them is operating under a contract, the status will remain the same.
However, you have to contact The Pensions Regulator in writing to inform them that you and the other director if there is one, believe both of you should be exempted from pension auto enrolment, quoting your letter code from the auto enrolment letter you will be sent, PAYE reference and Companies House number.
Company shareholders don’t generally function on the company payroll or have a contract of employment with the company. Hence, they are not classified as employees. If your company has no employees, then you will typically be exempt from pension auto enrolment duties. However, you will still need to inform The Pensions Regulator of this in writing.
In such a case, it is mandatory for the employees of the company to be auto enrolled as per the staging date.
Our partner service provider will assist you in selecting a pension plan that is tailored to your contractor status after fully understanding your financial needs and remuneration structure properly. Contractor Financials has partnered with sister company Contractor Wealth who understand that whilst planning for the future and reducing your tax bills, you also need to maintain some flexibility over your contributions.
If you want to know more about their pension models, you can get in touch with us on 020 3507 0087, or directly contact them. As we are not an Independent Financial Advisor, we are not able to advise you on pensions ourselves.