Pensions and Retirement Saving

It is reasonably well known that employers in the UK are obliged by law to make pension contributions for their employees and enrol them in pension schemes. This is known as auto-enrolment and was gradually introduced in stages following The Pensions Act 2008.  

What is less well known is that this obligation on employers also applies when companies engage “workers” who are not technically viewed as employees for tax and other purposes. Most Directors UK members will be classed as workers when they are engaged to direct a film or television programme and therefore they should be eligible to be auto-enrolled and to receive pension contributions from the production company engaging them.  

How does auto-enrolment work?  

Pensions are a complex topic and Directors UK does not provide pension or financial advice to individual members.  But here is a very high level view of how auto-enrolment works and the key features relevant for directors: 

1. Any director who earns more than £192 a week or £833 a month on a contract should be enrolled into the production company’s pension scheme and the production company should contribute a minimum of 3% of qualifying earnings into the scheme (with the director needing to contribute at least 5%). Tax relief is available on the workers contribution and the 5% includes the tax relief, so it’s less than 5% of earnings. Clearly on longer jobs this is a highly valuable benefit. 

2. Employers (i.e. production companies) are legally allowed to delay auto-enrolment for all their employees and workers by up to three months from their start date. This can have a big effect on the value of auto-enrolment for directors who work on shorter contracts. But the production company must treat all its employees and workers the same with regards to this delay in enrolment. So you should definitely ask what their auto-enrolment policy is. 

3. Directors who work through personal service companies are not covered by these rules as the obligation to enrol and pay pension contributions technically falls on the personal service company and not the production company.    However, there is nothing to stop you asking the production company to increase the rate it is paying to your PSC by 3% to reimburse the pensions contributions the PSC will be making (and which the production company would have to pay if they engaged you directly). Directors should definitely consider pension provision as part of the overall value of any contract offer.

Why this matters 

Pensions are an unusually valuable way of building up wealth because income that is paid straight into a pension (either by you, or by an employer) is subject to tax relief. 

Many directors spend significant periods working freelance, moving between productions, employers and contracts. While the workplace pension ‘auto-enrolment’ reforms have increased pension saving across the UK, freelancers and those working on shorter engagements are much more likely to miss out on workplace pension opportunities. As a result, many risk reaching retirement with lower levels of pension provision than those in continuous employment. 

Most directors will also be entitled to the UK State Pension but only if they have built up sufficient National Insurance contributions. Even then the State Pension alone is unlikely to provide the level of income many people expect in retirement, making workplace and personal pensions an important part of long-term financial planning. 

BACK TO ADVICE