An explanation of the terms used
- Basic pay
Basic pay includes all contractual payments such as salary/wages, and statutory payments like sickness and maternity pay, but it doesn’t include commission, bonuses, overtime and so on. It’s a gross (pre-tax) figure.
- Total pay
Total pay means all payments made to an employee, including their salary/wages, plus any commission, bonuses, overtime and so on. It’s a gross (pre-tax) figure.
- State pension age
This is the age when someone can start claiming their state pension. Under current rules, everyone will reach state pension age between the ages of 61 and 68. More about state pension age.
- Qualifying earnings
A band of earnings you can use to calculate contributions for auto-enrolment. For the 2016/17 tax year, it’s all an employee’s earnings between £5,824 and £43,000. Example: the contributions for an employee earning £20,000 would be based on £14,176 (£20,000 minus £5,824), rather than the full £20,000.
- Minimum total contribution
This is the minimum amount that needs to be paid into eligible and non-eligible jobholders’ (PDF 78KB) pension plans, and is expressed as a percentage of an employee’s earnings. By law, it needs to be at least 2% (or 3% if you’re using basic pay to calculate contributions). You must pay at least 1% of this (2% if using basic pay), with the employee making up any difference.
- Annual fund charge
This is an annual charge that members of workplace pension schemes have to pay.
- Eligible Jobholders
This is a worker earning over £10,000 and aged 22 to state pension age. Must ordinarily work in the UK.
- Non-eligible Jobholders
This is a worker earning above £5,824 but below £10,000 and aged 16-74 or above £10,000 and aged 16-21 or state pension age to 74. Must ordinarily work in the UK.
Before you begin
There are a few things you’ll need to know in order to get a Company Pension quote. If there’s any information you don’t have, please find it before continuing.
Please note: while some questions may seem complex, any workplace pension provider will need this kind of information before they can set up your scheme.
About your workforce
How many people in your business are aged 22 and over and earn more than £10,000 in total pay a year? (Including yourself)
We need to know this as it gives us a good idea of how many people will be in your scheme.
If you’re using the scheme for auto-enrolment, you’ll need to automatically enrol all employees aged 22 to state pension age who earn over £10,000 in total pay a year. Under auto-enrolment rules, these people are known as ‘eligible workers’.
To keep things simple when you’re requesting a quote, we don’t need you to discount any employees who are over state pension age.
In total, what is the annual basic pay for these employees? (Including yourself)
We’ll also need to know what you pay the employees above in basic pay in a year.
Basic pay is all an employee’s contractual and statutory payments (eg salary/wages, sickness and maternity pay), excluding commission, bonuses, overtime and so on. It’s a gross (pre-tax) figure.
About the pension scheme you want
Do you want to use qualifying earnings to calculate the contributions you and your employees have to pay into their pensions?
‘Qualifying earnings’ is a band of earnings you can use to calculate the pension contributions your employees are entitled to. For the 2016/17 tax year, it’s all an employee’s earnings between £5,824 and £43,000.
For example: the contributions for an employee earning £20,000 would be based on qualifying earnings of £14,176 (£20,000 - £5,824 = £14,176), rather than the full £20,000.
Using qualifying earnings is usually the cheapest way of doing things as an employer, but it may increase the annual fund charge that members of your scheme have to pay.
If you don’t use qualifying earnings, you’ll have to base the contributions on an employee’s total pay or basic pay instead.
What do you want the minimum total contribution to be for your scheme?
The minimum total contribution is the minimum amount that needs to be paid into eligible jobholders’ and non-eligible jobholders’ pensions, and is expressed as a percentage of an employee’s earnings. You must pay at least a certain amount of this, with the employee making up any difference.
The table below shows the minimum contribution levels set by government. Please note: the percentages vary depending on whether you’re calculating the contributions based on qualifying earnings, total pay or basic pay.
|Date||Total minimum contribution||Minimum employer contribution|
|Your staging date to Sep 2017||
|Oct 2017 to Sep 2018||
|Oct 2018 onwards||
The minimum total contribution you choose for your scheme must be at least the amount shown in the right-hand column. However, you can contribute more if you wish.
What is your company’s staging date?
Your staging date is when you have to start performing your auto-enrolment duties. By law, you’ll need a workplace pension scheme in place by this date.
Don’t know what your staging date is? Use The Pensions Regulator’s staging date checker.
When do you want your scheme to start?
Finally, you will also need to decide when you want your scheme to start. If you’re setting up this scheme for auto-enrolment, we suggest using your staging date (as long as it hasn’t already passed).