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
Are You Pension Happy?
Call us on 02084327334
I know how much my pension is worth
I know how much my pension costs
I have clear financial goals for my retirement

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 used up my ISA allowance for this year and I’m trying to find other tax-efficient ways...
I’m looking to set up a new pension for myself and wanted to know which private pension fund is...
I have a couple of company pensions from previous employers but I’m not sure how well they are...
I’m just about to retire and can take my pension now so I need to try and work out what to do with...
Need Help? Live chat now and get an instant answer from our Experts...


Our Latest Reviews
Matthew Draper

Excellent service at convenient times of the day specified by me. All product options were clearly outlined and I am very pleased.

Paul Devine

First class service. Helped me through the process from start to finish. Egle and Francis were very professional and talked me though all my options. Once the policies were set up, the after care after was also first class. Highly recommend. 5 stars all day long.

Josip Marjanovich

Victoria was very helpful about selection of suitable insurance. She always answered all questions in a timely manner.

We are rated 4.9/5 based on 1512 independent client reviews.
To read more of our independent client reviews click here →
4.93 / 5 Average
652 Reviews
Verified Buyer
Overall Rating
The whole process was a pleasure. Drewberry we're easy to deal with, polite, knowledgeable and helpful
Verified Buyer
Overall Rating
Very good, clear service would recommend to friends and family
Overall Rating
Sam Carr provided an efficient and professional service.
Verified Buyer
Overall Rating
Sam Carr provided a professional but enthusiastic service and helped make the whole process very straight forward. Goodness knows I have been through enough application forms recently. My insurance product was never going to be easy to find and I had been rejected on a number of other occasions through others ironically due to well managed common health conditions. I identified Drewberry in a last and disappointing trawl on th web to find someone that actually wanted to take on a difficult case like me. Some brokers wouldn't even consider me. When we applied for my first choice product Sam wasn't at all deterred by the long wait for my GP report or the final rejection that came back from the insurer, sadly I have become used to it. Within a day he had lined up the second choice and to my surprise he had hit the nail on the head and introduced me to the correct insurer and terms for my needs whilst nogotiating an excellent premium. I am extremely satisfied with what Sam has achieved for me and I would have no hesitation in recommending either him or Drewberry to friends, family and and business contacts. In the future, Drewberry will be my first point of contact. Many thanks!
Overall Rating
Tailored to my need and the staff gave very good service