Will I go contracting?

Why is contracting popular?

The choice of moving from permanent to contracting work is becoming a popular option. We are in a world that seems to be moving faster than ever, while giving the impression that it is becoming a smaller place – if that makes sense? Some of the reasons for making the switch to contracting, according to our clients, include work location flexibility. The freedom and flexibility to take some time out between projects is often another considered advantage. The opportunity to gain exposure to different industry sectors, and experience of cutting edge projects, are just some additional benefits for the risk contractor’s take.

Contracting is particularly suitable for careers including Business Analysts, Project Managers, Technical Support, Software Development and Database Analysts. Contracting offers a more lucrative option perhaps to permanent employment. The reason for this from an employer perspective includes the fact that a contractor needs to provide their own employee benefits package, and hence may get a lucrative contract as compensation.

Dealing with your pension on leaving employment

If you are leaving employment and were a member of an occupational pension scheme, you may have a number of decisions to make regarding your pension benefits. On leaving service you are entitled to a statement of options regarding what you can and cannot do with your accumulated pension. You will receive this statement from the administrators of your pension scheme. The problem is it may be up to 6 months after you leave service.

With your consent, as your financial planner, we can act in your best interests and help provide your options, a lot quicker than 6 months.

Have you more than, or less than, 2 years service?

If you have less than two years of service, you should have the possibly appealing option of a refund of your own contributions (though not your employer’s), which are taxable. If you have more than two years’ service you will not be entitled to a refund of contributions. However you will be entitled to choose between:

  • Retaining your benefits with the scheme or
  • Transferring your benefits to:
  1. A new Contractor’s Occupational Pension Scheme
  2. A Personal Retirement Bond
  3. A PRSA – this option is restricted.

So, in summary, perhaps you would like to consider if you can extract some cash from your previous employments retirement funds, while giving yourself the exposure and the opportunity’s of contracting. For those of you looking for help on calculating how lucrative contracting could be check out Deloitte’s calculator.

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