Pension Auto Enrolment for Contractors

The government has become concerned that the UK’s workforce is not putting enough away for their later years. As a result, the automatic pension enrolment scheme has come into force, making it mandatory for employers to enroll eligible workers into a workplace pension. It started being implemented in October 2012, and all firms should be operating under this scheme currently. But as a contractor how exactly will these changes affect you?

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What is automatic pension enrolment?

The automatic pension enrolment scheme means it is compulsory for employers to automatically enrol all eligible employees in a pension scheme, although employees do have the option to opt out if they wish. To be eligible for auto-enrolment employees must be:

• Aged between 22 and State Pension age
• Earn more than £10,000 a year
• Work in the UK

How will automatic pension enrolment affect umbrella company contractors?

If you are contracting through an umbrella company, you are classed as an employee of the umbrella company that you are working under. Umbrella company contractors will be automatically enrolled in a pension scheme in the same way that employees will be, but you do have the option to opt out of the scheme.

For more information about contracting through an umbrella company, you may want to visit our umbrella company hub page.