Auto-enrolment means most employees are now building a workplace pension — but understanding exactly how much is being contributed, what your employer is paying, and what that means for your take-home pay is less straightforward. This guide walks through the calculation for 2026/27.
For the full PocketWise guide to workplace pensions, see the Workplace Pensions Hub.
Auto-enrolment minimum rates 2026/27
| Contribution | Minimum rate | Basis |
|---|---|---|
| Employer | At least 3% | Of qualifying earnings |
| Employee (you) | At least 5% (includes tax relief) | Of qualifying earnings |
| Total minimum | 8% | Of qualifying earnings |
Qualifying earnings in 2026/27:
- Lower threshold: £6,240
- Upper threshold: £50,270
- Maximum qualifying band: £44,030
How to calculate your contributions
Step 1: Find your qualifying earnings
Qualifying earnings = Annual salary − £6,240 (if salary is above £6,240 but below £50,270)
If your salary is above £50,270, qualifying earnings are capped at £50,270 − £6,240 = £44,030.
| Annual salary | Qualifying earnings |
|---|---|
| £15,000 | £15,000 − £6,240 = £8,760 |
| £25,000 | £25,000 − £6,240 = £18,760 |
| £35,000 | £35,000 − £6,240 = £28,760 |
| £50,270+ | £50,270 − £6,240 = £44,030 (capped) |
Step 2: Calculate contributions
At the minimum 8% rate (5% employee, 3% employer):
| Annual salary | Qualifying earnings | Your contribution (5%) | Employer (3%) | Total (8%) |
|---|---|---|---|---|
| £15,000 | £8,760 | £438 | £263 | £701 |
| £25,000 | £18,760 | £938 | £563 | £1,501 |
| £35,000 | £28,760 | £1,438 | £863 | £2,301 |
| £50,270 | £44,030 | £2,202 | £1,321 | £3,523 |
Step 3: Allow for tax relief
Your 5% employee contribution can come from either:
- Relief at source: You contribute 4% from your take-home pay; HMRC adds 1% (basic rate tax relief). Higher-rate taxpayers claim the extra 20% through self-assessment.
- Salary sacrifice: You give up gross pay, and the full amount (before tax or NI) goes into your pension.
Relief at source worked example (salary £30,000):
Qualifying earnings: £23,760
Your employee contribution (5%): £1,188/year
→ You actually pay 4% from your pay: £23,760 × 4% = £950/year (£79/month)
→ HMRC adds basic rate relief: £238/year
Your employer contributes: £713/year (3%)
Total pension contributions: £1,901/year on a £30,000 salary
Salary sacrifice: the more tax-efficient option
Under salary sacrifice:
- You give up £X of gross salary
- The £X goes into your pension as an employer contribution
- You pay no income tax or NI on the £X
- Your employer saves the 15% employer NIC on the sacrificed amount (from April 2025)
Salary sacrifice worked example (salary £30,000, contributing 5%):
5% of qualifying earnings £23,760 = £1,188
Income tax saved (20%): £237.60
Employee NIC saved (8%): £95.04
Total employee saving: £332.64/year — so a £1,188 pension contribution costs you only £855 net
If your employer passes on their NIC saving (15% × £1,188 = £178), total annual contribution becomes £1,188 + £714 (employer 3%) + £178 = £2,080 for the same real cost to you.
How contributions affect your take-home pay
Using the relief at source method (paying 4% from net pay):
| Monthly salary | Employee pension (4% of qualifying earnings ÷ 12) | Approximate reduction in monthly take-home |
|---|---|---|
| £1,250 (£15,000/yr) | £29 | £29 |
| £2,083 (£25,000/yr) | £63 | £63 |
| £2,917 (£35,000/yr) | £96 | £96 |
| £4,190 (£50,270/yr) | £147 | £147 |
These are small reductions — and for each pound you contribute, your employer adds at least 60p (at the 3% minimum). That is an immediate 60% return before any investment growth.
When employers exceed the minimum
Many employers offer matched contributions significantly above the auto-enrolment minimum. Common structures:
| Employer scheme | What it means |
|---|---|
| 3% employer / 5% employee minimum | Legal minimum only |
| 5% employer / 5% employee | Employer contributes 5% regardless of what you put in |
| 5% up to match | Employer matches your contribution up to 5% — you get 0% extra if you only contribute the minimum 5% (some schemes work this way) |
| Double-match up to 8% | You contribute 4%, employer contributes 8%. Contribute 8%, employer contributes 8% |
Key action: Always check the maximum your employer will match and contribute enough to get the full match. Not doing so is leaving part of your salary unclaimed.
Opting out: what you lose
If you opt out of your workplace pension:
- You lose your employer contributions (a pay cut in practice)
- You lose tax relief on your contributions
- Your employer must re-enrol you every three years
Opting out is almost never financially advantageous unless you are in severe short-term financial difficulty. Even then, reducing contributions rather than opting out entirely may be a better option if your employer allows it.