Contribution options explained
Examples of the contribution types
Ben - a sales employee
|Basic pay||£35,000 a year|
|Sales bonus||£1,000 a year|
|Overtime||£5,000 a year|
|Total pay||£41,000 a year|
£35,000 a year
£1,000 a year
£5,000 a year
£41,000 a year
How the different contributions work for Ben
The figures shown here are would be applicable until the 5th April 2019, after which they’ll change to the levels shown above
|Amount||How is it worked out||Minimum employer contribution||Minimum total contribution|
|Qualifying earnings||£34,968||£6,032 is deducted from Ben's salary before the percentage that needs to be put into his pension is calculated.||
£699.36 a year
2% of £34,968
£1,748.40 a year
5% of £34,968
|Basic pay (set one)||£35,000||The percentage that’s put into Ben’s pension is taken from his basic salary. His basic salary will only include contractual and statutory payments.||
£1,050 a year
3% of £35,000
£2,100 a year
6% of £35,000
|Pensionable pay (set two)||£36,000||For set two contributions, the percentage put into Ben’s pension is taken from his pensionable pay. To use set two contribution levels, Ben’s pensionable pay must be more than 85% of the total amount an employee earns. Pensionable pay can include any other payment or benefit that is outlined as being pensionable in an employee’s contract of employment.||
£720 a year
2% of £36,000
£1,800 a year
5% of £36,000
|Total pay (set three)||£41,000||The percentage put into Ben’s pension is taken from 100% of Ben’s salary, including any commission, overtime and bonuses.||
£820 a year
2% of £41,000
£2,050 a year
5% of £41,000
Got a question?
We answer some of the most frequently asked questions about auto enrolment.
Can contribution levels vary between employees?
Yes – under auto enrolment legislation, you can make contributions at different rates for different groups of employees. Remember, though, that auto enrolment legislation doesn’t replace any other employment legislation, so you’ll need to make sure that you comply with all your duties when you make this decision.
Can I make single contributions to a pension?
Yes. You’ll still need to make sure that you make monthly minimum pension contributions, but you can make additional one-off contributions too. For instance, after an employee has been awarded a bonus payment, you might need to make an additional pension contribution as part of your contractual agreement.
Employees can also make single contributions to their workplace pension.
When will I need to make contributions?
You need to work out your contributions each time you pay your staff. Some providers, including Aviva, can only accept monthly contributions – even if you pay your staff more frequently.
How does salary sacrifice work?
An employee agrees to give up part of their salary or bonus in exchange for a pension payment paid by their employer. As an employer, you'll pay lower National Insurance contributions as a result of paying your employees a reduced salary. Your employees will also pay lower National Insurance contributions, and possibly less income tax. You're free to use your National Insurance contribution saving how you wish, some employers might use a portion of it to supplement their employees' pension plans. Employees can choose to use their savings to boost their pension provision or increase their take home pay. Find out more about Government guidelines for salary sacrifice
Find out more about auto enrolment
Auto enrolment doesn’t have to be challenging. We’ve got all the information you need to get up and running with your workplace pension scheme.