As a Contractor, Do I Get a Pension?

Investing in your future has always been a good idea, and pensions are an obvious way to start. The earlier you start saving, the easier it will be to give your future self the gift of a comfortable retirement, so in this article we’re looking at the question of how you can get a pension if you’re a contractor.

Private pensions

If you’re trading through your own Limited company, or as a sole trader, you will be responsible for your own pension arrangements, so the answer to this question is “only if you arrange one”.

Pensions are a very tax efficient way to save, and it’s well worth asking your accountant for advice on the best arrangements for your particular circumstances. You may also want to contact a pensions expert who can advise on the best product for your situation and goals.

If you’re employed by an umbrella company, or engaged by a recruitment agency, you can still make your own private pension arrangements if you want to, but you may also be automatically enrolled onto a workplace pension scheme.


All UK employers are required to provide a workplace pension for their employees. They must auto-enrol all qualifying employees, and they must contribute to the scheme. Minimum contributions at the time of writing (2024/25) are 5% of qualifying earnings from the employee, and 3% from the employer.

If you meet the qualifying conditions, your umbrella company or agency must enrol you onto their pension scheme. This will usually happen after the maximum deferment period of twelve weeks. You can ask to be enrolled straight away rather than waiting for the deferment period to end if you prefer.

If you meet the qualifying conditions but you don’t want to join the workplace pension, you do have a right to opt out, but you must be enrolled first. Your umbrella or agency are not allowed to encourage you to opt out and you must be re-enrolled after three years. We would advise you to at least look at the scheme and consider carefully before opting out, even if you’ve already made your own pension arrangements.

How this affects Agency PAYE contractors

Contractors who are engaged and paid directly by a recruitment agency are often treated as “workers” rather than “employees”, but they are included in the pension auto-enrolment rules.

However, because this kind of engagement is by nature temporary, many don’t reach the end of the 12-week deferment period before moving on to another contract with a different agency. Those who are enrolled, either because they work on longer contracts or because they request to be enrolled early, often find they build up a number of different pension pots as they move from one assignment to another.

If you find yourself in this situation, it might be a good idea to look at a private pension that will allow you to consolidate those smaller pension pots into one. This will simplify your position, and allow you to choose a pension that suits you, rather than using several different products with varying terms and conditions.

How this affects umbrella company employees

Umbrella company employees are fully employed by the umbrella company, and can work on many different assignments for many different clients and agencies during that one period of employment.

This means you’re much more likely to reach the end of the deferment period, and be auto-enrolled onto the umbrella’s workplace pension scheme. It’s also easier to stay with the same umbrella company through years of contracting, which would mean you only have the one workplace pension.

If you do move from one umbrella company to another it’s a good idea to ask for early enrolment at your new umbrella. This will help you avoid creating a 12-week gap in your pension contributions each time you switch, which could leave you with an unexpected shortfall when you come to retire.

Salary sacrifice pensions

Salary sacrifice, as the name suggests, involves sacrificing some of your salary for another benefit. In this case, your employer would make a corresponding contribution to your pension. This has the advantage that the contribution is made before your salary is taxed, saving you PAYE tax and employee NICs and reducing the cost of your pension contributions.

For umbrella company employees, salary sacrifice can be even more beneficial, as the contribution can also reduce the umbrella’s employment costs, making this an even more efficient way to save.

Your umbrella or agency are not required to offer salary sacrifice, but many do because it’s such a benefit to their contractors. They may even be able to contribute to your choice of private pension via salary sacrifice, either instead of or as well as enrolment on their workplace scheme. If this would be of benefit to you, it’s well worth asking your umbrella or agency if they can do it.

If you have questions or if we can help in any way, please call our expert team on 01604 360222 or email [email protected].