Workplace Pension Calculator 2026/27
What are your employer pension costs? Calculate contributions under auto-enrolment, compare qualifying vs total earnings schemes, and see salary sacrifice NI savings.
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Qualifying Earnings Band 2026/27
Qualifying earnings contributions are calculated on earnings within this band only.
Total Pension Contribution
Employer + Employee
Contribution Breakdown
Understanding Workplace Pensions in 2026/27
Under the UK Pensions Act, workplace pensions are a legal requirement for all employers, regardless of company size. Whether you employ one personal assistant or manage a workforce of hundreds, auto-enrolment rules require you to enrol eligible staff into a qualifying workplace pension scheme and make regular minimum pension contributions.
Understanding how contributions are calculated helps businesses budget accurately for staffing overheads, prevents compliance breaches, and ensures employees receive the full retirement benefits and tax relief they are entitled to.
Auto-Enrolment Requirements & Worker Eligibility
Employers must assess their workforce every pay period. A worker must be automatically enrolled into a qualifying pension scheme if they meet all three criteria:
- Age Requirement: Aged at least 22 years old and under the State Pension age (currently 66).
- Earnings Trigger: Earn more than £10,000 per year (or £833 per month / £192 per week).
- Location: Ordinarily work in the United Kingdom under an employment contract.
Minimum Statutory Contribution Rates
The law establishes strict minimum contribution percentages that must be paid into the employee’s pension scheme when calculating on qualifying earnings:
| Contributor | Statutory Minimum Rate | Role in Scheme |
|---|---|---|
| Employer | 3% | Mandatory non-repayable employer pension cost |
| Employee | 5% | Deducted from gross pay (includes 1% government tax relief) |
| Total Minimum | 8% | Combined legal floor under auto-enrolment rules |
Note: Employers are permitted to contribute more than the 3% minimum. If an employer chooses to pay the full 8%, the employee is not required to contribute anything.
Qualifying Earnings vs Total Earnings Schemes
UK employers have flexibility in choosing how pensionable pay is defined in their pension scheme rules:
1. Qualifying Earnings Scheme (Most Popular)
Contributions are calculated strictly on gross earnings between the lower limit of £6,240 and upper limit of £50,270. Any earnings below £6,240 or above £50,270 are excluded from pension calculations.
2. Total Earnings Scheme (Set 1 / Tier 1 Certification)
Contributions are calculated on 100% of the employee’s gross earnings from the very first pound (£1), without any lower or upper caps.
How Pension Contributions Are Calculated: Step by Step
Consider Maria, who earns an annual gross salary of £28,000. Her company operates a standard qualifying earnings scheme with 3% employer and 5% employee rates:
£28,000 - £6,240 = £21,760 pensionable earnings
£21,760 × 3% = £652.80 per year (£54.40 / month)
£21,760 × 5% = £1,088.00 per year (£90.67 / month)
£652.80 + £1,088.00 = £1,740.80 per year (£145.07 / month)
Employer Pension Contribution Reference Table
Quick reference guide comparing annual statutory minimum contributions (3% on qualifying earnings) against common enhanced employer rates:
| Gross Salary | Qualifying Earnings | Employer 3% (Min) | Employer 5% | Employer 8% |
|---|---|---|---|---|
| £18,000 | £11,760 | £352.80 | £588.00 | £940.80 |
| £25,000 | £18,760 | £562.80 | £938.00 | £1,500.80 |
| £30,000 | £23,760 | £712.80 | £1,188.00 | £1,900.80 |
| £40,000 | £33,760 | £1,012.80 | £1,688.00 | £2,700.80 |
| £50,000 | £43,760 | £1,312.80 | £2,188.00 | £3,500.80 |
| £60,000 (Capped) | £44,030 (Max) | £1,320.90 | £2,201.50 | £3,522.40 |
Salary Sacrifice: How Much Does It Actually Save?
Salary sacrifice (also known as salary exchange) is an agreement where an employee gives up a contractual portion of their gross salary in return for their employer making an equivalent pension contribution.
Because gross pay is officially reduced, both employee and employer pay less National Insurance (Class 1). Below is a clear comparison for James, who earns £30,000 and sacrifices £1,500 into his pension pot:
| Item | Without Salary Sacrifice | With Salary Sacrifice | Total Savings |
|---|---|---|---|
| Gross Contractual Salary | £30,000 | £28,500 | - |
| Employer Pension (3% QE) | £712.80 | £712.80 | - |
| Employer NI (15% above £5k) | £3,750.00 | £3,525.00 | £225.00 saved |
| Employee NI (8% above £12,570) | £1,394.40 | £1,274.40 | £120.00 saved |
| Employee Income Tax (20%) | £3,486.00 | £3,186.00 | £300.00 saved |
Opting Out & Triennial Re-Enrolment Rules
Auto-enrolment was created to boost national retirement savings, but workers retain the legal right to opt out:
The 1-Month Opt-Out Window
An employee has exactly one month from receiving formal enrolment details to submit an opt-out notice directly to the pension provider. If they opt out within this period, all deducted contributions are returned in full on the next payroll run.
Every 3 Years: Cyclical Re-Enrolment
Employers must re-assess and re-enrol any eligible workers who previously opted out every 3 years. The employer must submit a re-declaration of compliance to The Pensions Regulator within five months of their cyclical re-enrolment date.
⚠️ Failure to comply with auto-enrolment or re-enrolment triggers statutory enforcement notices and daily penalties ranging from £50 to £500+ per day from The Pensions Regulator.
Non-Eligible Workers: Who Can Ask to Join?
Under auto-enrolment legislation, staff are categorized into three distinct classes depending on age and earnings:
| Worker Classification | Age Band | Annual Earnings | Enrolment Duty | Employer Must Pay? |
|---|---|---|---|---|
| Eligible Jobholder | 22 to State Pension age | Over £10,000 | Automatic enrolment | Yes (3% min) |
| Non-Eligible Jobholder | 16–21 or 67–74 (or 22–66 earning £6,240–£10,000) | £6,240 to £10,000 | Right to opt in | Yes (3% min) |
| Entitled Worker | 16 to 74 | Under £6,240 | Right to join | No obligation |
Which Pension Scheme to Use: NEST and Alternatives
Employers can select any pension scheme that qualifies under auto-enrolment rules. The most common schemes include:
NEST
National Employment Savings Trust. Set up by the UK government with a public service obligation to accept any UK employer, regardless of payroll size or revenue. Free setup for employers.
Master Trusts
Multi-employer schemes like The People's Pension, Smart Pension, and NOW: Pensions. Highly rated for automated cloud payroll integrations with Xero, Sage, and BrightPay.
Group Personal Pensions
Offered by major insurers like Aviva, Legal & General, Royal London, and Standard Life. Ideal for employers looking to offer enhanced fund choices and personal financial planning options.
Tax Relief on Pension Contributions
How tax relief is applied depends on the pension scheme structure established by the employer:
| Method | Relief at Source | Net Pay Arrangement | Salary Sacrifice |
|---|---|---|---|
| How It Works | Deducted from net take-home pay; provider reclaims 20% basic relief from HMRC | Deducted before income tax is calculated in payroll; immediate full tax relief | Contractual pay reduction; completely exempt from both Income Tax and National Insurance |
| Basic Rate (20%) | £80 paid → £100 in pot | £100 gross → £80 net cost | £100 gross → ~£72 net cost |
| Higher Rate (40%) | Employee claims extra 20% via Self Assessment | Automatic 40% relief applied at payroll | Immediate 40% tax + 2% NI saved automatically |
| Low Earners (<£12,570) | Still receives 20% tax top-up! | No tax relief received via payroll | Cannot sacrifice below National Minimum Wage |
Frequently Asked Questions (FAQs)
Clear answers to the most common questions regarding workplace pension contributions and auto-enrolment compliance.