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% from HMRC (through Self Assessment or HMRC’s online claim service); under a net pay arrangement the relief is already given at your rate.
- 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 + £713 (employer 3%) + £178 = £2,079 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.
If You Are Not Working
The Non-Earner Exception: Key Numbers
| Amount | |
|---|---|
| Maximum gross contribution that gets tax relief (no earnings) | £3,600/year |
| Amount you pay in (net) | £2,880/year |
| Tax relief added by provider | £720/year |
| If you do have earnings | Tax relief on your own contributions up to 100% of earnings; annual allowance £60,000 (lower for some people) |
| Age limit for tax relief | Must be under 75 |
| Minimum pension access age | 55 (rising to 57 from April 2028) |
How the £2,880 / £3,600 Rule Works
Most personal pensions and SIPPs use relief at source. When you pay in £2,880, the pension provider automatically claims 20% basic-rate tax relief from HMRC and adds it to your pot, bringing the total to £3,600. The provider claims it for you, though you need to give them your details, such as your National Insurance number, when you join.
Crucially, this relief is given at the basic rate regardless of whether you have ever paid income tax. You do not need to be a taxpayer to receive it. A non-working carer who has never paid a penny of income tax still receives the same £720 top-up on a £2,880 contribution.
If you pay higher-rate tax, you can claim additional relief (a further 20% on income taxed at 40%, or 25% on income taxed at 45%, in England, Wales and Northern Ireland) through Self Assessment, or through HMRC’s online claim service if you do not file a return (this applies to relief at source pensions; under net pay the relief is already given at your rate). For non-earners who pay no tax above the basic rate, only the 20% basic-rate relief applies, as there is no higher-rate tax to reclaim. Our pension tax relief for non-taxpayers guide explains the mechanics in full detail.
What Counts as Relevant UK Earnings?
The most you can pay in and still get tax relief is generally the higher of:
- 100% of your relevant UK earnings for the year, or
- £3,600 (the non-earner exception)
| Income type | Counts as relevant UK earnings? |
|---|---|
| Employment salary, wages, bonuses | ✅ Yes |
| Self-employment profit (sole trader) | ✅ Yes |
| Partnership profit | ✅ Yes |
| Statutory maternity pay and statutory sick pay (paid by your employer and taxed) | ✅ Yes |
| Rental income | ❌ No |
| Dividend income | ❌ No |
| Bank interest / savings income | ❌ No |
| State Pension | ❌ No |
| Private pension income | ❌ No |
| Universal Credit / benefits | ❌ No |
| Overseas income not taxed in the UK | ❌ No |
Two income types that are not on HMRC’s list of relevant UK earnings are rental income and investment income. A landlord receiving £60,000 per year in rent but with no employment or self-employment income can still only get tax relief on £3,600 gross of pension contributions. The pension contributions from rental income guide explains how incorporating a property business can change this.
Self-Employed with Zero or Negative Profit
If you are registered as self-employed but your business made a loss or zero profit in the tax year, you have no relevant UK earnings from self-employment. Your limit for tax relief defaults to the £3,600 non-earner exception.
This catches people who are actively running a business but had a difficult trading year. The rule is clear: it is taxable profit, not turnover or revenue, that determines your earnings figure. If your expenses exceeded your income, your relevant earnings from self-employment are nil.
If you had any employment income earlier in the same tax year, for example, you were employed for six months before going self-employed full-time, that employment income counts as relevant UK earnings for the whole year and may allow a higher contribution. See our pension contributions guide for worked examples at different income levels.
Worked Example: Non-Working Spouse
Sarah has stopped working to care for their two children. Her husband James earns £85,000 as a software engineer. They want to use Sarah’s pension allowance to spread wealth between them and build Sarah’s retirement provision.
James transfers £2,880 from their joint savings into Sarah’s SIPP. The SIPP provider claims £720 tax relief from HMRC and adds it to Sarah’s pot. Sarah now has £3,600 invested for 2026/27 at no additional cost beyond the £2,880 paid in.
Over 10 years, assuming modest 5% annual growth, that £3,600 per year builds to approximately £45,300 in Sarah’s pension. From 6 April 2028 the earliest she can access it is age 57, and she can usually take up to 25% as a tax-free lump sum.
This approach also gives each spouse a pension pot of their own, so retirement income can be spread across two people who each have their own Personal Allowance.
Which Pension Vehicle Is Best for Non-Earners?
If you are not employed, you cannot join a new workplace pension, because those are arranged by an employer. The practical options for non-earners are:
Self-Invested Personal Pension (SIPP): a type of personal pension that lets you control the specific investments in it. You open a SIPP with a provider of your choice, make contributions in your own time, and control the specific investments it holds. Relief at source is claimed automatically by the provider. See our SIPP guide and best SIPP providers comparison.
Personal Pension (stakeholder or standard): a stakeholder pension must meet specific government requirements, such as limits on charges. Some people prefer this if they do not want to make investment decisions. Stakeholder pensions must accept contributions as low as £20/month, which makes them accessible at very low contribution levels.
Both operate on relief at source, making the tax-relief process identical. The main difference is investment choice and control. For most non-earners contributing £2,880 per year who want straightforward long-term growth, a low-cost SIPP with a simple index fund is usually the most effective vehicle.
Specific Situations
Career Break, Sabbatical, or Gap Year
If you are taking a planned break from work, travelling, studying, or simply resting: you can continue contributing £2,880 per year to a pension without any employment. The break does not interrupt your ability to use the non-earner exception. Our pension contributions on a career break guide covers the full picture including what happens to employer contributions during a formal leave of absence.
Early Retirement with No Earned Income
If you have retired before state pension age, whether through FIRE, redundancy, or choice, and have no employment or self-employment income, you can still contribute £2,880 per year. This can be a useful way to continue sheltering money in a tax-efficient wrapper even in early retirement, particularly if you are drawing down from other assets (ISAs, investments) and want to maintain some pension growth. From age 75, contributions no longer qualify for tax relief.
Between Jobs
If you are between jobs (unemployed, searching, or waiting to start a new role), you can still contribute £2,880 in a tax year in which you have no earnings. If you had earnings earlier in the tax year (before leaving your last job), those count and the amount you can get tax relief on for the full year will be the higher of those earnings or £3,600.
Full-Time Carer
Unpaid carers who have left work to look after a parent, partner, or other relative can use the non-earner exception. Caring can be financially isolating, and a £2,880 annual pension contribution (topped up to £3,600 by HMRC) is one way to continue building retirement security during years that would otherwise leave a gap. Carers who receive Carer’s Allowance (£86.45/week in 2026/27) are getting National Insurance credits for state pension purposes, but that does not count as earned income for private pension contributions.
What Happens If You Overpay?
If you have no relevant UK earnings, tax relief only covers contributions up to £3,600 gross in a tax year. If you accidentally overpay, the excess contribution is not covered by tax relief and HMRC can require you to return the relief on the excess. It is your job to make sure you do not get tax relief on more than the limit, and HMRC can ask you to pay back any relief over it.
If you return to work or start generating earned income part-way through the year, the most you can get tax relief on for that full year becomes the higher of £3,600 or 100% of your relevant UK earnings for the year. The £60,000 annual allowance counts everything paid into your pensions in the year, including your employer’s contributions, and a tax charge applies only above it.
Paying for a Partner
How It Works
When you pay money into your spouse’s SIPP or personal pension, the transaction looks like this:
- You transfer money from your bank account to your spouse
- Your spouse (or you directly, via a third-party contribution) pays into their pension
- The pension provider claims 20% tax relief from HMRC on a relief at source scheme
- Higher-rate taxpayers with a relief at source pension claim additional relief in their own name, via self-assessment or HMRC’s online claim service
The contribution is always in your spouse’s name. The annual allowance and tax relief limit that apply are their allowance and their earnings.
Contribution Limits by Spouse’s Earnings
| Spouse’s annual UK earnings | Most that gets tax relief (gross) | Net cost to you |
|---|---|---|
| No UK earnings | £3,600 | £2,880 |
| £15,000 | £15,000 | £12,000 (basic rate relief applied) |
| £30,000 | £30,000 | £24,000 (basic rate relief) |
| £60,000+ | £60,000 (the annual allowance; a tax charge applies above it) | £48,000 net (basic; additional relief if higher rate) |
All contributions from any source count toward the annual allowance. If your spouse has an employer pension with contributions already going in, those reduce the headroom for additional contributions.
The Non-Taxpayer Advantage
If your spouse or partner has no income or earns under £12,570 (the 2026/27 personal allowance), they pay no income tax. But under a relief at source pension, HMRC still pays 20% basic rate relief into their pot.
Example: You contribute £2,880 into your partner’s SIPP. HMRC adds £720 (20%). The pension pot receives £3,600. Your partner paid no tax. This is effectively a 25% return on the contributed amount simply from the tax top-up.
Higher-Rate Households
If one partner pays 40% or 45% tax and the other pays 20% or nothing, contributions into the lower earner’s pension generate 20% basic rate relief, but the couple as a unit does not claim back higher-rate relief on those contributions. However, the strategic value remains: you are building pension wealth at 20% relief rather than no relief, which is still meaningful.
If the higher earner instead increased their own pension, they would get 40% relief on additional contributions. So the optimal approach depends on which partner has more headroom under the annual allowance.
Worked Example
Scenario: Sarah works full-time earning £65,000/year. Her husband Tom has stepped back from work and earns £8,000 from occasional freelance work.
Tom’s relief at source SIPP: Sarah contributes £8,000 from their joint account into Tom’s SIPP. Tom’s pension provider claims £2,000 from HMRC (20% basic rate). Tom’s pot receives £10,000.
Tax efficiency: £8,000 spent → £10,000 in pension. Tom’s earnings of £8,000 are below the personal allowance so he pays no income tax, yet the pot still receives £2,000 in tax relief, effectively free money.
Career Breaks
What Happens to Different Types of Pension During a Career Break
| Pension type | During break | Employer contributions |
|---|---|---|
| Workplace DC (auto-enrolled) | Pot remains invested; no new contributions | Stop when salary stops |
| Workplace DB (defined benefit) | Accrual stops; may be deferred | Stop when salary stops |
| Personal pension / SIPP | Remains invested; can contribute voluntarily | N/A, no employer |
| State Pension | NI record may gap unless credits apply | N/A |
Maternity, Paternity and Shared Parental Leave
Occupational pension rights during statutory leave are legally protected:
- Employer contributions: Must continue at the same rate as before leave, based on your normal (pre-leave) salary, for the full period of Ordinary Maternity Leave (first 26 weeks), and for any Additional Maternity Leave (weeks 27–52) unless you stop receiving pay entirely
- Your own contributions: Based on the pay you actually receive (SMP, SPP, ShPP): not your normal salary
- NI credits: Statutory Maternity/Paternity Pay counts as earnings for NI purposes, so NI qualifying years continue
Childcare-Related Career Breaks
If you claim Child Benefit for a child under 12 and are not working, you receive Class 3 NI credits automatically: these count as qualifying years for your State Pension. This is one of the most underused protections in the UK benefits system.
Important: Register for Child Benefit even if you do not intend to receive the payment (your household income may exceed the threshold), because the NI credits are attached to the registration, not the payment itself.
Keeping Private Pension Contributions Going
Even without an employer contribution, maintaining pension savings during a career break helps through compound growth.
| Monthly net contribution | Annual gross (after 20% relief) | Over 5 years (no growth) |
|---|---|---|
| £120/month | £1,800/year | £9,000 |
| £240/month | £3,600/year | £18,000 |
A £240/month contribution is the most that gets tax relief for a non-earner (£2,880 net → £3,600 gross). This limit applies regardless of career break length, and to anyone without relevant UK earnings.
Returning to Work After a Career Break
When you return to employment, you will typically be auto-enrolled into your employer’s pension after a re-enrolment date (if you opted out or left). Check:
- Whether your employer requires you to actively re-enrol or will do so automatically
- Whether you can transfer old pension pots into your new employer’s scheme
- Whether there are gaps in your NI record worth filling before the voluntary contribution window closes (you can generally fill the last six tax years, and HMRC sometimes extends this window)
Sick Leave
How Contributions Change as Sick Pay Reduces
Most workplace pensions calculate contributions as a percentage of earnings. As your sick pay reduces, so do the contributions based on it.
| Phase of sick leave | Pay received | Typical pension contribution position |
|---|---|---|
| Full pay (contractual sick pay) | Normal salary | Normal contributions from both employer and employee |
| Half pay (contractual) | 50% of salary | Contributions reduce to 50% |
| Statutory Sick Pay only | £123.25/week (2026/27) | Contributions may continue at SSP level |
| No pay | £0 | Contributions typically stop (unless contract guarantees otherwise) |
Statutory Sick Pay (SSP) 2026/27: £123.25/week, payable for up to 28 weeks.
Checking Your Employment Contract
Some employers, particularly in the public sector, large corporates, or those with strong employment terms, maintain full employer pension contributions throughout sick leave, even when pay has reduced. Your employment contract or staff handbook will specify:
- How long full pay continues
- What rate sick pay reduces to and when
- Whether employer pension contributions are maintained beyond the pay reduction
If your contract is silent, the default is that contributions follow pay.
Your Pension Pot During Sick Leave
Regardless of whether new contributions are being made, your existing pot:
- Remains fully invested
- Continues to grow (or fall) with investment returns
- Cannot be accessed by your employer
- Does not expire or lapse during absence
Auto-Enrolment and Re-Enrolment on Return
If you return to work after long-term sick leave, you should be automatically re-enrolled into your workplace pension if you were previously a member. If you had opted out or ceased membership during absence, your employer must re-enrol you at the next statutory re-enrolment date (every three years). You can opt out again if you wish.
Worked Example
Scenario: Mark has been off work for 7 months with a back injury. His employer provides 3 months’ full pay, then SSP for the remaining 4 months.
- Months 1–3: normal salary contributions continue. Monthly pension input (employee + employer): £320
- Months 4–7: only SSP received (£123.25/week ≈ £534/month). Employer contributions based on SSP: approximately £16/month. Mark’s employee contribution: approximately £27/month
- Total pension contribution over 7 months: approximately £1,132 vs £2,240 if he had worked
Mark’s pot remains invested throughout. When he returns to work, normal contributions resume. He considers whether to make one-off additional contributions to partially fill the gap.
After You Retire
Contribution Rules After Retirement
| Your situation | Most that gets tax relief each year | Tax relief available |
|---|---|---|
| Retired, still working part-time (£20,000 earnings) | £20,000 (100% of earnings) | Yes, at your marginal rate |
| Retired, no UK earnings | £3,600 gross (£2,880 net) | Yes, 20% basic rate (relief at source) |
| Retired, drawing flexi drawdown income | £10,000 (MPAA applies) | Yes, at your marginal rate on earnings |
| Retired, bought standard annuity (no drawdown) | 100% of earnings (a tax charge can apply above the £60,000 annual allowance) | Yes |
The MPAA Trap
The most important thing to understand is the interaction between drawdown and future contributions. Once you take income from a flexi-access drawdown fund, even a single £1 payment: you trigger the MPAA. From that point, your money purchase annual allowance drops to £10,000.
This can catch people out who:
- Take a small lump sum from their SIPP to supplement retirement income, then return to part-time work and want to rebuild their pension
- Start drawdown at 60 while still working, and later want to contribute more
Avoiding the trap: If you want to continue contributing significantly to a DC pension after retirement, consider:
- Taking tax-free cash only and buying a lifetime annuity that cannot decrease with the remainder (this does NOT trigger the MPAA)
- Using small pot rules (lump sums of £10,000 or less from up to three personal pension pots) also does NOT trigger the MPAA
- Deferring drawdown until you are confident you will not need to contribute further
Worked Example
Scenario: Anne retires at 63 from full-time employment and starts part-time consultancy earning £18,000 per year. She has not yet drawn from her pension.
- She can contribute up to £18,000/year to her SIPP (100% of earnings)
- She contributes £12,000 net → provider claims 20% → £15,000 in pension pot
- She has not triggered the MPAA, so the full £60,000 annual allowance applies
- Net tax cost: £12,000 for £15,000 in pension (basic rate taxpayer)
If Anne later starts drawdown to supplement income: the MPAA applies and her DC contributions are capped at £10,000 per year from that point.