Can I Take Out a Private Pension if I’m Contracting?

I am an IT contractor with my own limited company contracting into other companies for work. I was wondering whether I can take out a personal pension arrangement while I’m contracting given I have no access to an employer scheme. If possible, how much can I contribute to it?
Question asked by Jane Robertson
Need Pension Advice?
Call us on 02084327333
First Name
Phone
Email

Answered by Andrew Jenkinson

You can take out a pension as a contractor, whether or not you have an employer’s pension from a previous job (you may wish to consider consolidating old pensions into your new arrangement).

Pension Tax Relief

You can get tax relief at your highest marginal rate of tax on contributions up to 100% of earnings with an overall cap of £40,000. There is an option to use the “carry forward” to reclaim previous years’ allowances. You will also receive tax relief on these contributions.

How much pension tax relief will I get if I'm contracting?

There are a number of options for contractor pensions. If you work for an umbrella company you are effectively on their payroll, and so may be auto-enrolled into their company pension scheme even though you are effectively working for yourself. This is usually the case where the umbrella company offers a PAYE option for you to pay tax on your earnings.

For more on pension tax relief for contractors, use our Pension Tax Relief Calculator here →

This may not be appropriate for you, so you could examine other options such as opening your own personal pension. If you are self-employed, or are paid through you own a limited company, you will need to sort out your own arrangements. This usually involves making a contribution to a personal pension scheme.

Pension for Company Directors

If you are a director of your limited company you can arrange for that company to make pension contributions to an approved scheme on your behalf.

Pension for Self-Employed

If you are self-employed, you can make contributions to a personal pension and enjoy tax relief at your marginal rate.

Pensions for contractors

The new rules on how you use your pension fund at retirement have made pensions much more flexible, so now is a good time to think about saving for the future. If you would like some help please feel free to contact us to speak with one of our qualified pension advisers.

You may also be interested in..

With no employee benefits contractors not only look to make their own pension arrangements but are generally also interested in contractor income protection (given no sick pay) and relevant life insurance (given no death in service). Both of these plans can be owned and paid for by a limited company to cover one person.

contractor private pension
 
self employed
 
company director
 
retirement planning
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
Start your journey today...
  Find out how a Drewberry financial adviser can help you reach your destination by making the most of your finances.
Call us on 

Frequently Asked Pensions Advice Questions

 
I’ve built up a few small final salary pension pots over my working life. They’re not worth...
 
A few years ago I was diagnosed with coronary heart disease. As a result, I have angina and recently...
 
I’m almost 55 and have a final salary pension. I’ve read the articles about the new pension...
 
I want to make sure that I get the most out of my pension, how can I compare different plans to help...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Kevin Paul
05/09/2017

Excellent service renewing our medical insurance, professional advice, good rates found and excellent professional after service, highly recommended.

Max Edgar
09/09/2017

Nadeem was brilliant. He was very patient and worked very well with me to come up with the best solution possible for my budget. Perfect solution. Thank you very much.

Aidan Smyth
11/09/2017

Dealt with me promptly and provided me with the most cost-effective option consistent with my requirements. Very pleased and thank you.

We are rated 4.9/5 based on 1129 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.93 / 5 Average
1,222 Reviews
A
Overall Rating
Really, really helpful! Stopped me from signing up with an unhelpful company, and did basically all of the legwork for me in signing up with the right one. I can't have been the most helpful client as I'm 19 and only just started looking into it last week, but he took all the questions in stride! Put up with me turning to ask my dad questions every 2 minutes as well. I was helped by 2 workers; Sam and Nick. Thank you very much to both!
L Finch
Overall Rating
Good communication and follow ups. Friendly. A thorough research for my insurance needs.
M
Overall Rating

Sam Barr-Worsfold was very helpful and provided excellent customer service. Sam discovered I was paying too much premium for my current cover. Sam recommended and helped moved to a new cover with lower premium that provided the level of cover (terms required stated in the provider's policy) I wanted. I recommend highly recommend Sam and Drewberry Insurance. Thank you Sam.
Anonymous
Overall Rating
Thorough, knowledgeable and great communication
Anonymous
Overall Rating
Went through each policy in detail and made sure I was getting the correct one for me