Contractors' Questions: What about pensions as a couple?

Contractor's Question: Due to a sudden change of circumstances, I'm planning to follow my wife into professional contracting. Before I take the plunge, I'd like to know how the structure I adopt - umbrella or limited company - will impact my savings potential for retirement. And although we haven't talked about it together, what pensions options do we have as a couple?

Expert's Answer: The good news is that it is never too late to change your financial planning for retirement. As a contractor, you are in an ideal position to exploit the tax savings available on pension contributions and make a real difference to your nest egg.

Since the simplifications to pensions, introduced in 2006, you can invest virtually all of your contract income direct from your limited company. But it's not just 'Ltd' company set-ups, which typically operate outside IR35, who can benefit.

Contractors who use a PAYE umbrella company may also be able to take advantage of a salary sacrifice arrangement to reduce their tax bill by up to 68 per cent.

There are a wide range of pensions available and an independent financial adviser specialising in contractors would be able to tailor advice to your full financial circumstances, helping you make the right decision for your future. As a contractor, you will likely need a pension that can be as flexible as you are, with the ability to adapt payment schedules and contributions to match your contracts and level of income on a monthly basis.

Discussing your own personal financial future with your partner is critical to ensure that you are both making the necessary provisions for retirement as it is likely that you will be retiring together. This is particularly important if you or your partner have had time out of work for raising children, or national insurance contributions payments have been missed in the past, as this could affect your entitlement to the state pension.

And with the state pension coming under increasing pressure, contractors should consider taking steps now to save for retirement in the future. Considering financial plans together, as a couple, will help ensure you can both achieve your retirement goals.

The expert was Tony Harris, of ContractorMoney,, an independent financial adviser to contractors.