The Contractor

Jas saves money

every time she uses her SSAS

Jasminder is a contractor in employee training and works on different sites often for many months at a time.

Jasminder operates through a limited company and changes to IR35 may mean that she may no longer enjoy national insurance exemption on dividend income in the future. Jasminder has paid into a pension in the past but losses in the stock market makes her nervous about paying more money in.

Jasminder wants to pay off her mortgage when she can and did not realise that at age 55 she can take all of her money out of a pension scheme to pay off her mortgage. After taking financial advice she sets up a SSAS with Retirement Capital through her contractor business.

Her current contract will earn £50,000 in the next year. As part of the contract agreement, she agrees to receive via “contractor remuneration sacrifice” a 20% contribution into her SSAS bank account. This means that at the end of the contract term her business will pay £10,000 into her SSAS. The difference of £40,000 she will take as earnings.

The £10000 paid into her SSAS account means that there is no national insurance liability and no taxation on the payment. This represents a massive saving in taxation all round and based on taxation rates as at 2020, a total tax saving of 34% or £4580 is earned, inclusive of national insurance liabilities.

Jasminder repeats this process building up a nice healthy cash sum for her future. She does not want to invest into the stock market and instead uses Retirement Capital cash management system through Barclays Bank. This spreads the risk on her cash with the major banks and also earns her interest.

She can use this money at age 55 to pay off her mortgage early. Jasminder has full online access to her SSAS and all the money in her SSAS account is registered in her name.

Outcome: Lower corporation and national insurance savings. Pay off mortgage early.