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How much should you contribute to workplace pensions?

The amount you and your workers will need to contribute to a workplace pension will depend on how you define an employee's earnings and how you consider the variable earnings they receive. There is a choice of four contribution definitions:

Qualifying earnings

Contributions are expressed as a percentage of the employee's total earnings between the lower and upper limit of the qualifying earnings band.

These limits will vary depending on the length of your pay period and are the equivalent of £5,824 and £43,000 a year (2016/17). This means any earnings below the lower limit or above the upper limit do not qualify for pension contributions.

Set 1. Basic pay

Contributions are expressed as a percentage of basic salary, excluding commission, bonuses, overtime or similar payments. Additional allowances can also be excluded.

Set 2. Basic pay of at least 85% of total earnings

Contributions are also expressed as a percentage of basic salary, however this basis can only be used where basic pay across those using this set averages out to at least 85% of total earnings. It allows for a lower percentage to be paid.

Set 3. Total earnings

Contributions are expressed as a percentage of everything an employee earns with your company, including commission, bonus payments, overtime or similar payments. Unlike qualifying earnings there's no lower or upper limit.

Phasing in contribution amounts

Regardless of the basis you select, contribution amounts will increase until April 2019 as they are gradually phased in. Please select the tabs below to view the minimum contribution percentage for each basis.

Qualifying earnings Total contribution required Minimum employer contribution Employee potential contribution
Until 5 April 2018 2% 1% 1%
6 April 2018 to 5 April 2019 5% 2% 3%
6 April 2019 onwards 8% 3% 5%
Set 1 Total contribution required Minimum employer contribution Employee potential contribution
Until 5 April 2018 3% 2% 1%
6 April 2018 to 5 April 2019 6% 3% 3%
6 April 2019 onwards 9% 4% 5%
Set 2 Total contribution required Minimum employer contribution Employee potential contribution
Until 5 April 2018 2% 1% 1%
6 April 2018 to 5 April 2019 5% 2% 3%
6 April 2019 onwards 8% 3% 5%
Set 3 Total contribution required Minimum employer contribution Employee potential contribution
Until 5 April 2018 2% 1% 1%
6 April 2018 to 5 April 2019 5% 2% 3%
6 April 2019 onwards 7% 3% 4%

Pension contributions in practice

Contributions are structured so that an overall minimum amount is set. Your company will then be required to pay a minimum percentage contribution, leaving the employee to make the required minimum overall amount.

Example: If the overall minimum contribution required is 8% and the employer is required to pay a minimum of 3%, each worker who is auto-enrolled into the scheme will need to pay at least 5%. Alternatively, you could offer to match contributions whereby you each pay a 4% contribution.

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