Working via and Umberella Company - pension contributions Employee or Employer

segovia

This is the scenario.........

I am receiving state pension and have income from other sources (Property), have a short term contract via an agency and umbrella company. 

I can ask the umbrella company to pay all my Net salary after employers NI contributions into my SIPP or take all the salary minus the tax (there are no employee NI as I have state pension) and then pay into my SIPP and claim tax relief.   Is one way better than the other ?

The Umbrella company isn't very flexible if I want to change frequency and amount of employers contribution.    

DullGreyGuy

Can you have them put all of it into pension? I know with the salary sacrifice it has to leave minimum wage 

segovia

Hi—Yes, they can put all of it into my SIPP—there has been no mention of leaving a balance of the minimum wage.

Grumpy_chap

segovia said:

Hi—Yes, they can put all of it into my SIPP—there has been no mention of leaving a balance of the minimum wage.

All into the pension as employer contributions will be the most tax efficient - using salary sacrifice will mean employer NI is avoided.
You cannot be paid below NMW, so can only sacrifice whatever is above that amount.

DullGreyGuy

Grumpy_chap said:

segovia said:

Hi—Yes, they can put all of it into my SIPP—there has been no mention of leaving a balance of the minimum wage.

All into the pension as employer contributions will be the most tax efficient - using salary sacrifice will mean employer NI is avoided.
You cannot be paid below NMW, so can only sacrifice whatever is above that amount.

So sacrifice down to NMW and then employee contributions to 0?

segovia

Grumpy_chap said:

segovia said:

Hi—Yes, they can put all of it into my SIPP—there has been no mention of leaving a balance of the minimum wage.

All into the pension as employer contributions will be the most tax efficient - using salary sacrifice will mean employer NI is avoided.
You cannot be paid below NMW, so can only sacrifice whatever is above that amount.

I wish that were true, the umbrella company takes the employer NI contributions and I get what remains as salary or investment into my SIPP

DullGreyGuy

segovia said:

Grumpy_chap said:

segovia said:

Hi—Yes, they can put all of it into my SIPP—there has been no mention of leaving a balance of the minimum wage.

All into the pension as employer contributions will be the most tax efficient - using salary sacrifice will mean employer NI is avoided.
You cannot be paid below NMW, so can only sacrifice whatever is above that amount.

I wish that were true, the umbrella company takes the employer NI contributions and I get what remains as salary or investment into my SIPP

It is true... if your umbrella will allow it is a separate matter

segovia

I don't think I can negotiate otherwise, the day rate from the agency is higher tan normal to make an alwance for this 

https://www.contracteye.co.uk/umbrella-contractor-employers-nic-costs.shtml

Grumpy_chap

Do you have any choice of which Umbrella Company to use?

Many will facilitate salary sacrifice pension contribution down to NMW 

segovia

Yes, but most I spoke with are all the same

Grumpy_chap

segovia said:

Yes, but most I spoke with are all the same

That is rather odd.

It is attractive for Umbrella Companies to offer salary sacrifice pension contributions because it is one of the ways that the value can be maximised for the individual so rather a selling point for the UC to offer that facility.  

I wonder whether the phrase of the question asked led to an incorrect / incomplete answer or the answer misunderstood.

The gross rate received by the UC always has to include Employer's NI plus Apprenticeship Levy.  However, the way UC's work is usually as follows:

1. Receive the gross rate
2. Deduct the UC fee
3. Make employer pension contributions (under auto-enrolment) or higher pension contributions as appropriate
4. What is left is then the individual's salary plus Employer's NI plus Apprenticeship Levy.  If the individual has used SS to take their salary to NMW (remainder to pension), then the amount at this stage is NMW salary plus Employer's NI plus Apprenticeship Levy based upon that NMW salary level.  
5. UC retains the Employer's NI plus Apprenticeship Levy to pay HMRC, the remaining amount is then the individual's gross salary.
6. UC pays the salary to the individual, subject to deductions for income tax, Employee's NI, student loans (if applicable).

Some UC's will only pay pension contributions to a linked scheme provider rather than any SIPP that the individual may have.