The government has set minimum levels of contributions that must be made into your workplace pension scheme by you and/or your employer. Your employer will tell you how much you’ll have to contribute. Find out how the minimum contribution is worked out under the different options.
What are minimum pension contributions?
The minimum total contributions under automatic enrolment have been set by the government. The current minimum total contribution will be 8% for most people.
Your employer must contribute a minimum amount, in most cases this is 3%.
If the contribution from your employer isn’t enough to cover all of the minimum total contribution, you’ll need to make up the difference.
The government will also help you save for your pension by giving you tax relief on your contributions.
The minimum total contribution into your pension is usually based on what’s known as ‘qualifying earnings’.
Need more information on pensions?
Call us free on 0800 011 3797 or use our webchatOpens in a new window. One of our pension specialists will be happy to answer your questions.
Our help is impartial and free to use, whether that’s online or over the phone.
Opening times: Monday to Friday, 9am to 5pm. Closed on bank holidays.
How minimum contributions are worked out
The minimum contribution is made up of money from your pay, money contributed by your employer and tax relief from the government. If the total minimum for your pension is based on qualifying earnings, then the contributions will be worked out as follows:
| Minimum contributions based on qualifying earnings | |
|---|---|
|
Employer |
3% |
|
Worker |
4% |
|
Tax relief from the Government |
1% |
|
Total |
8% |
What are qualifying earnings?
These are a section of your earnings before Income Tax and National Insurance contributions are deducted. For the 2023-24 tax year this is everything over £6,240 and up to £50,270.
Earnings include:
- your wages or salary
- commission
- bonuses
- overtime.
What is pensionable pay?
Your employer might choose to base contributions on your ‘pensionable pay’, rather than qualifying earnings.
This is most likely to be the case where your employer provided a workplace pension scheme before the introduction of automatic enrolment.
Pensionable pay is defined by the rules of the pension scheme. Typically, pensionable pay is basic salary, not including elements of your earnings such as commission, bonuses and overtime.
Has your employer decided to use pensionable pay rather than qualifying earnings? Then they must meet one of three sets of alternative requirements for their pension scheme to qualify for use under automatic enrolment and to calculate the minimum total contributions that need to be made.
Your employer will confirm the level of contributions they will make and the level that is needed from you before you’re automatically enrolled.
The three sets are listed below.
Set One
Contributions calculated on your basic earnings. They don’t include bonus, overtime, commission or certain staff allowances (such as shift pay or relocation allowance) in the calculation.
| Your employer contributes at least: | Cost of contribution to you: | Tax relief from the government of: | Total contribution is at least: |
|---|---|---|---|
|
4.0% |
4.0% of your basic pay |
1.0% of your basic pay |
9.0% of your basic pay |
Set Two
Contributions calculated on basic earnings where basic earnings make up at least 85% of total earnings on average for all workers in the scheme. They don’t include bonus, overtime, commission or certain staff allowances (such as shift pay or relocation allowance) in the calculation.
| Your employer contributes at least: | Cost of contribution to you: | Tax relief from the government of: | Total contribution is at least: |
|---|---|---|---|
|
3.0% |
4.0% of your basic pay |
1.0% of your basic pay |
8.0% of your basic pay |
Set Three
Contributions are based on all earnings before tax. This would include things like bonus, overtime, commission.
| Your employer contributes at least: | Cost of contribution to you: | Tax relief from the government of: | Total contribution is at least: |
|---|---|---|---|
|
3.0% |
3.2% of your full pay |
0.8% of your full pay |
7.0% of your full pay |
Example
If you have earnings from employment of £24,000 a year, your qualifying earnings are calculated for the current tax year as £24,000 - £6,240 = £17,760 a year.
If your employer is only making the minimum contribution (as above), the amounts that need to be contributed in the current tax year are:
| Your employer contributes: | Cost of contribution to you: | Tax relief from the government of: | Total contribution |
|---|---|---|---|
|
3% |
4% |
1% |
8% |
|
£532.80 a year |
£710.40 a year |
£177.60 a year |
£1,420.80 a year |
|
£44.40 a month |
£59.20 a month |
£14.80 a month |
£118.40 a month |
The way you receive tax relief will depend on the type of pension scheme you’re in and how your scheme chooses to manage it.
If you’re a higher rate taxpayer you might need to claim the extra tax relief. Your pension scheme should tell you about this.
You can find out more in our guide Tax relief on pension contributions
If your employer contributes more than the employer’s minimum contribution, they might allow you to make a lower contribution, as long as the minimum total contribution is paid.
The tax relief given by the government is based on the amount of your contribution. So if the amount of your contribution reduces, the amount of tax relief you benefit from also reduces.
Both you and your employer can decide to contribute more than the minimum amounts. Although there’s no obligation for your employer to make contributions on earnings above the qualifying earnings cap (£50,270 a year in the 2023-24 tax year), they might choose to.
