To work out pension contributions from your salary, you need three things: your pensionable pay, your contribution percentage, and the method your scheme uses to apply tax relief. For most auto-enrolled workers in the UK, the minimum total going into the pot is 8% of qualifying earnings between £6,240 and £50,270 a year, split as 5% from you and 3% from your employer.1GOV.UK. Workplace Pensions: What You, Your Employer and the Government Pay The arithmetic is simple once you know which slice of your pay the percentage applies to.
Find Your Pensionable Pay First
Pensionable pay is not always the same as your gross salary. Employers pick one of three definitions, and the one your scheme uses sets the starting figure for every calculation that follows.
- Qualifying earnings: only the slice of annual gross pay between £6,240 and £50,270 counts. Anything below or above is ignored. This is the most common method for auto-enrolment schemes.2The Pensions Regulator. Earnings Thresholds
- Basic pay only: contributions are based on your base salary, excluding bonuses, overtime, and commission. The percentage is often set higher to compensate for the narrower base.
- Total gross earnings: everything counts, including overtime and bonuses. Less common, but some larger employers use it.
Your contract or payslip should say which applies. If it just says “pensionable pay,” ask payroll. Get this wrong at the start and every figure that follows will be off.
Work Out Your Contribution
Take someone earning £30,000 a year in a standard auto-enrolment scheme using qualifying earnings and the 5% employee rate.
- Subtract the lower limit: £30,000 minus £6,240 leaves £23,760 in qualifying earnings.
- Apply your rate: 5% of £23,760 is £1,188 a year.
- Divide by pay periods: on a monthly payroll, that is £99 a month.
If your scheme uses basic pay or total gross earnings, skip the subtraction and apply the percentage straight to that pay figure. Many employers set contribution rates above the statutory minimum, so check your scheme documents rather than assuming the 5/3 split. The 8% total is a floor.3The Pensions Regulator. Minimum Contribution Increases Planned by Law – Phasing
Qualifying earnings include salary, bonuses, commission, overtime, and statutory pay such as maternity or paternity pay.1GOV.UK. Workplace Pensions: What You, Your Employer and the Government Pay So a month with overtime or a bonus pushes your contribution up for that period, provided the total still sits inside the band.
Add What Your Employer Pays
Your employer’s share uses the same qualifying earnings figure at their own rate. At the 3% minimum, the employer of the £30,000 earner above contributes 3% of £23,760, which is £712.80 a year, or £59.40 a month.3The Pensions Regulator. Minimum Contribution Increases Planned by Law – Phasing Combined with your £99, that puts £158.40 a month into the pension before any tax relief adjustment.
Adjust for Tax Relief
Tax relief is where the figure leaving your payslip and the figure landing in your pot stop matching. How that gap closes depends on which of two methods your scheme uses.
Net Pay Arrangement
Under net pay, your contribution comes out of your gross salary before income tax is calculated.4GOV.UK. PTM044230 – Contributions: Tax Relief for Members: Methods: Net Pay The full amount goes into the pot and you never pay income tax on it. A basic-rate taxpayer putting in £100 loses £80 of take-home pay, because the £20 they would otherwise have paid in tax stays with the contribution.
Relief at Source
Under relief at source, the contribution comes out of your after-tax pay. Your pension provider then claims 20% basic-rate relief from HMRC and adds it to the pot.5GOV.UK. Tax on Your Private Pension Contributions: Tax Relief An £80 deduction from your pay becomes £100 in your pension. The quick calculation: divide the amount leaving your pay by 0.8 to get the gross contribution landing in the pot.6Nest Pensions. How Is Tax Relief Calculated
If You Pay 40% or 45% Tax
The basic 20% relief happens automatically under both methods. Beyond that, the two systems diverge. Under net pay, the full relief at your marginal rate is already built into the lower tax deducted from your wages. Under relief at source, you claim the extra 20% (or 25% for additional-rate payers) through Self Assessment.5GOV.UK. Tax on Your Private Pension Contributions: Tax Relief Higher-rate taxpayers in relief-at-source schemes who skip the tax return are effectively leaving money with HMRC that belongs in their pot.
Salary Sacrifice Changes the Maths
Salary sacrifice is a different mechanism. You formally agree to reduce your contractual gross pay, and your employer pays the sacrificed amount straight into your pension. Because your gross salary is now lower, you pay less income tax and less National Insurance on what remains.7HM Revenue and Customs. Salary Sacrifice for Employers
Say your salary is £35,000 and you sacrifice £200 a month. Your gross pay for tax and NI purposes becomes £32,600. Income tax and employee NI are calculated on the lower figure, while £2,400 a year goes into your pension untaxed.
Your employer also pays less National Insurance. From April 2025, the employer rate is 15% on earnings above the secondary threshold.8GOV.UK. National Insurance Rates and Categories: Contribution Rates On a £2,400 annual sacrifice, that saves the employer up to £360. Some employers add part or all of that saving to your pension on top of the sacrificed amount, which makes salary sacrifice meaningfully better than an equivalent standard contribution. Whether yours does varies, so ask HR.
One caution: because your official salary drops, salary sacrifice can affect things calculated from your headline pay, including mortgage affordability, statutory maternity pay, and life cover set as a multiple of salary. The pension gain is real, but weigh it against anything else that keys off your gross number.
The Annual Allowance Ceiling
There is a limit on how much can go into your pensions each year with tax relief. For 2025/26 the annual allowance is £60,000, covering the total of your contributions and your employer’s across all schemes you belong to.9GOV.UK. Pension Schemes Rates Contributions above the limit trigger a charge that claws back the relief. Most employees on typical salaries will never approach it through payroll alone, but if you have multiple schemes, make large voluntary top-ups, or receive a sizeable employer contribution in a senior role, the allowance starts to matter.
Check the Figure on Your Payslip
Once the arithmetic makes sense, test it against your actual payslip. Look for a line labelled “pension,” “employee pension contribution,” or your scheme name. Multiply your qualifying earnings (or whatever your scheme uses) by your rate and divide by your pay frequency. If the figure on the slip is more than a pound or two off, the usual causes are a pay change that shifted your qualifying earnings, a bonus or overtime payment counted differently than you expected, or a payroll error.
Errors do happen, and they compound. A £10-a-month underpayment from your employer adds up to over £5,000 across a 30-year career before any investment growth. If the numbers do not line up and payroll cannot explain why, The Pensions Regulator accepts complaints about unpaid or underpaid contributions.10The Pensions Regulator. Warnings, Notices and Payment of Fines