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Finding the best contractor pensions
Sorting out your retirement is too important to leave to chance. Let us help you find the best way to manage your contractor pension contributions, allowing you to enjoy your golden years in comfort and security.
Whether you plan to retire early or keep things flexible, identifying the best pension plan for contractors is the first step to creating a retirement that’s as unique as your working life. Though contractors don’t have the luxury of an employer to sort out their pension, they do enjoy significant tax relief on pensions, no matter how much they earn. As there is now no fixed percentage on the amount of profit you can invest, the pension plans for contractors presented here allow you the option of putting up to 100% of your contract profit into your pension fund without being taxed.
Choosing pensions for contractors with a limited company can be a little more involved than it would be for a person in traditional employment. We can help you structure your retirement plans and make your contractor pension contributions go further. The freedom of managing your company’s income dispersal means that you can precisely tailor your pension plan to maximise the eventual return on your investment.
We’ve ensured that finding contractor pensions with a limited company has never been easier. No need to get bogged down in research, you can search our carefully sourced selection of the best pensions for contractors with confidence, allowing you the time to get on with the important stuff.
Frequently asked questions
What are the best pension options for contractors?
There are significant tax breaks for contractors wanting to pay into a UK pension scheme. Since 2014, UK law has allowed contractors to invest up to £40,000 tax-free in their pension per year. If you are employed by an umbrella company, you will be auto-enrolled into their pension scheme. Here too, you can invest up to 100% of your wages into your pension and avoid paying income tax or NICs. However, if you’d rather manage your own pension plan, you need to evaluate which is the best private pension scheme for your needs. Here are the two main things you need to look out for:
- Flexibility. The sources and quantity of your contracting work can fluctuate. It’s important that your limited company pension is backed by a bank that understands the nature of contractor work and will allow payments to remain flexible across the years.
- Longevity. While you might have a taste for calculated risk, your pension provider is one area where you should err on the side of caution. The best pensions are those that proven themselves viable over the long term. While you might have a taste for calculated risk, your pension provider is one area where you should err on the side of caution. The best pensions are those that proven themselves viable over the long term.
Obviously, because of how pensions work, it’s important to invest as soon as you are able. Investing early in your UK private pension allows a much longer period of growth and minimises the financial risks inherent in fluctuating self employment. No matter which pension plan you choose, it’s better to commit sooner rather than later.
Once you’ve chosen where to place your work pension, it’s worth looking at the many ways to maximise your retirement income. You might wonder how much tax you will pay on your pension and the good news is that though contractors must pay taxes on their income, if they divert their profit into a pension fund, they pay very little tax on it. It is especially tax efficient to pay your pension direct from your business account rather than contributing personally.
In 2014, the announcement of new UK pension rules meant you could withdraw money from a private pension – contractors as young as 55 years old can gain access to 25% of their pension fund. They can then invest that money in property or other financial products whilst still enjoying the significant tax break allotted to pension payments.
Access to this newly released money means that contractors can invest in property or funnel their nest egg into purchasing an annuity or an alternatively secured pension. An annuity is an insurance product which, in return for a lump sum paid up front, pays out a fixed sum to the purchaser (and/or their spouse) every year until their death.
Download our Guide to Pensions
Retirement. There’s a lot to think about as a contractor. Unlike many permanent employees across the country, you’re not enrolled into a workplace pension. We get it. So, rather than being bogged down with research, we’ve made things simpler for you with a guide that helps you plan your future.
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