Understanding Workplace Pensions
Under auto-enrolment, most UK employers must enrol eligible workers into a workplace pension scheme. The minimum contribution is 8% of qualifying earnings (5% employee, 3% employer). Qualifying earnings are the portion of your salary between £6,240 and £50,270 per year. Contributions above the minimum can significantly boost your retirement savings.
Qualifying Earnings Explained
Pension contributions under auto-enrolment are calculated on qualifying earnings — the band of your salary between £6,240 and £50,270. This means if you earn £28,000, your qualifying earnings are £21,760 (£28,000 minus £6,240). At 5% employee contribution, that is £1,088 per year, not £1,400. Some employers use total salary instead, which is more generous.
Tax Relief on Contributions
Most workplace pensions use either relief-at-source (you pay net, HMRC adds 20%) or net pay arrangement (contribution taken before tax). Basic-rate taxpayers get the same benefit either way. Higher-rate taxpayers can claim additional relief via self-assessment. Salary sacrifice schemes provide further savings by reducing both income tax and National Insurance.
Frequently Asked Questions
Can I opt out of my workplace pension?â–¾
Yes, but it is generally not recommended. Opting out means you lose your employer's contribution — essentially free money towards your retirement. If you opt out, your employer will automatically re-enrol you every 3 years. You can opt out again, but each time you miss out on employer contributions and tax relief.
Should I contribute more than the minimum?â–¾
The minimum 8% total contribution is unlikely to provide a comfortable retirement for most people. Financial guidance generally suggests 12-15% (including employer contributions) as a better target. Check if your employer matches higher contributions — many will match up to a certain percentage, giving you an immediate 100% return on additional savings.
What happens to my pension if I change jobs?â–¾
Your pension pot stays invested when you leave a job. Your new employer will enrol you in their scheme. You can leave old pots where they are, or consolidate them into your new scheme or a personal pension. Consolidating can make tracking easier and may reduce fees, but check for any exit charges or loss of valuable benefits first.
Who is eligible for auto-enrolment?â–¾
You must be automatically enrolled if you are aged 22 to State Pension age, earn more than £10,000 per year, and work in the UK. Workers aged 16-21 or State Pension age to 74 who earn over £6,240 can opt in. Self-employed individuals are not covered by auto-enrolment but can set up their own personal pension.
Calclypso Editorial Team
Auto-enrolment rates verified against The Pensions Regulator 2025-26. Last updated: April 2026. This calculator provides estimates only. Your actual contributions may vary based on your employer's scheme.