Workplace pension contributions

On 6th April 2019 the minimum contributions to a workplace pension increased from 5% to 8%. The increase is split between you, your employer and the taxman, so you might not have to contribute as much as you think.


The contributions increased because the Government wants to help people save more for their future and this small increase now, could really pay off in the long run.

Workplace pension contributions

The contributions into your workplace pension are shared between you, your employer, and if you benefit from tax relief the taxman too. The minimum contributions increased in April 2019 from 5% to 8%, and while you may be paying slightly more, your employer and the tax man will be matching your contributions so it could mean a lot more going towards your future. And if you're a higher rate tax payer then you could be able to claim additional tax relief.

Our tables can help you see how the contributions have changed.

Make tax work for you

The taxman will normally top up your contribution with basic rate tax relief (currently 20%). So, if you pay £80, the taxman can add £20, giving a total contribution to your pension of £100.

If you pay more than 20% tax on some of your income, you can claim additional tax relief either by contacting HMRC or via your self-assessment tax return. If you are a Scottish or Welsh taxpayer the tax relief you're entitled to will be at the Scottish or Welsh Rate of income tax, which may be different from the rest of the UK.

Tax treatment depends on your individual circumstances. Your circumstances and tax rules may change in the future.

Is it enough?

An increase to 8% is a welcome boost to retirement savings throughout the UK but you can of course pay more than this into your pension.

Our recent Retirement Report recommended saving 12% of your earnings into your pension, but this does include your employer and tax contributions too.

If you want to increase your pension contributions further you can speak to your employer and they should be able to help.

Do I qualify for a workplace pension, and what is automatic enrolment?

Automatic enrolment was introduced to help people save for a more comfortable retirement, on top of the State Pension. Essentially auto enrolment means if you’re employed, earning over £10,000 in any one job and between the age of 22 and State Pension age your employer has to include you in a workplace pension scheme.

You can opt out, but its worthwhile thinking what is best for your future, and your employer has to re-enrol you every 3 years too.

See how your workplace pension works

piggybank 5%

Workplace pension contributions increased on 6th April 2019 to help you save more for the future

  • April 2019

  • You:
    4%
  • Add
  • Taxman*
    1%
  • Plus
  • Employer
    3%
  • Equals
  • Total
    8%
 
  • Previously

  • You:
    2.4%
  • Add
  • Taxman*
    0.6%
  • Plus
  • Employer
    2%
  • Equals
  • Total
    5%

* The taxman's contribution is in the form of basic tax relief.

Annual contributions

 
  • 5%

    Minimum contribution

  • You:
    £648
  • Add
  • Taxman*
    £162
  • Plus
  • Employer
    £540
  • Equals
  • Total
    £1,350
 
  • 8%

    Minimum contribution

  • You:
    £1,080
  • Add
  • Taxman*
    £270
  • Plus
  • Employer
    £810
  • Equals
  • Total
    £2,160

What does this mean for you?

If you’re on a salary of £27,000:

Contributing the previous minimum of 5% into your pension pot would add a total of £1,350 to your pension each year.

At the new minimum rate of 8%, the total annual contributions would add up to £2,160. Half of this total would come from your employer and the taxman.

This works out as an extra £36 per month coming from you, with the rest topped up by your employer and the taxman.

The difference the increase could make when you’re 65 based on your age now



25 year old - an extra

£61,000

in your pension pot



35 year old - an extra

£39,000

in your pension pot



45 year old - an extra

£22,200

in your pension pot


Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits which isn't guaranteed, and can go down as well as up. The value of your plan could fall below the amount(s) paid in.

**We have assumed: The individual earns £27,000 each year. Earnings each year in line with the Average Weekly Earnings Index (AWEI). Contributions increased to 5% from April 2018 and will increase to 8% from April 2019. Investments grow at 4.5% each year. An inflation rate of 2% each year. Plan charges of 0.75% each year. Benefits are taken at age 65. Premiums are paid annually.

The figures are for illustration purposes only and are not guaranteed. Remember, the values of investments can go down as well as up.

Price inflation reduces the worth of savings and investments over time. The figures above are shown in real terms, meaning they take account of the effects of price inflation. All information correct as at February 2019. Tax rules may change.

See what it means for you in pounds and pence

Check how the change could add up in your pension pot with our free online calculator.

Take a moment to explore the basics

Watch our short Pension Basics film for a quick overview of the changes, and the difference it could make for your future finances.

Proportion of UK adults who are saving adequately for retirement*

46%

2012

Before automatic enrolment

55%

2018

Did you know...

An extra 9% of people have started saving adequately for retirement since automatic enrolment was introduced in 2012.

* Source: Scottish Widows Retirement Report 2018

Good to know

If you have a job earning between £6,132 and £10,000 per year, you won’t be automatically enrolled into your workplace pension. However if you choose to opt in, your employer will pay in too.