Saving for retirement is a critical part of financial planning, and in the UK, workplace pensions make it easier for employees to build a nest egg. Thanks to the government’s auto-enrolment scheme, both employees and employers contribute to a pension pot. But what are the standard contribution rates, and how do they work?
In this post, we’ll look at some of the essential details of pension contributions, including the minimum amounts for employers and employees and how tax relief plays a part.
What Is Auto-Enrolment?
Auto-enrolment is a UK government initiative launched in October 2012 to tackle the pension savings gap by ensuring more workers put money aside for retirement. Under this scheme, eligible employees are automatically enrolled into a workplace pension by their employer, with both parties making regular contributions to the scheme.
Who Qualifies for Auto-Enrolment?
As of the 2025/26 tax year, you must be auto-enrolled into a workplace pension scheme if:
- You are aged 22 or over, but under State Pension age
- You earn at least £10,000 per year from a single job
- You usually work in the UK
- You are not already part of a qualifying workplace pension scheme
Even if you don’t meet all of these criteria, you may still be able to opt in voluntarily, and your employer may be required to contribute.
You can learn more directly from the Pensions Regulator: The Pensions Regulator – Auto-enrolment Overview
Standard Pension Contribution Rates in 2025/26
Under current legislation, the minimum total contribution under auto-enrolment is 8% of qualifying earnings, divided between employer and employee as follows:
| Contribution Type | Rate |
| Employer | Minimum of 3% |
| Employee | 5% (includes 1% tax relief via relief at source) |
| Total | 8% minimum |
What Are Qualifying Earnings?
Qualifying earnings refer to a specific band of earnings used to calculate pension contributions. For the 2025/26 tax year, these are set at:
- Lower earnings threshold: £6,240
- Upper earnings threshold: £50,270
This means contributions are only calculated on earnings that fall between £6,240 and £50,270. For example, if an employee earns £30,000 annually, contributions are based on £23,760 (i.e., £30,000 – £6,240).
These thresholds are reviewed annually and may change slightly in future tax years.
You can verify the current thresholds on GOV.UK: GOV.UK – Workplace pension contributions
How Do Employee Contributions Work?
If you’re eligible for auto-enrolment, your pension contributions are automatically deducted from your gross salary, that is, before tax is applied. These deductions are then paid into your workplace pension scheme alongside your employer’s contributions.
How Tax Relief Works
To encourage retirement saving, the UK government adds tax relief to your pension contributions. The way this relief is applied depends on your scheme’s setup, but in most cases it follows the relief at source method.
Basic Rate Taxpayers (20%)
If you’re a basic rate taxpayer (earning under £50,270 in the 2025/26 tax year), you’ll receive 20% tax relief automatically.
- For every £80 you contribute, the government adds £20, making a total of £100 going into your pension pot.
- This tax relief is claimed and added by your pension provider – you don’t need to take any action.
This means you’re effectively saving more at a lower personal cost.
Higher and Additional Rate Taxpayers
If you’re a higher rate (40%) or additional rate (45%) taxpayer, you can claim additional tax relief on your contributions—but you must do so through your Self Assessment tax return.
- Example: You contribute £80, and your pension provider claims £20 from HMRC (just like a basic rate taxpayer).
- You can then claim an extra £20 (for 40%) or £25 (for 45%) through your tax return, either as a tax rebate or reduced future tax liability.
More guidance: GOV.UK – Tax on your private pension contributions
Tip: If you don’t complete a tax return, you can still request additional tax relief by contacting HMRC directly.
What Are Employer Contributions?
As part of the auto-enrolment rules, UK employers are legally required to contribute to their employees’ workplace pensions. This contribution is a percentage of the employee’s qualifying earnings and it’s a key part of building a sustainable retirement fund.
Minimum Employer Contribution (2025/26)
For the 2025/26 tax year, employers must contribute a minimum of 3% of each eligible employee’s qualifying earnings into their workplace pension scheme.
This minimum is not optional—employers must meet it to remain compliant with The Pensions Regulator.
For example:
- If an employee earns £35,000, their qualifying earnings would be £28,760 (£35,000 – £6,240)
- The employer must contribute at least 3% of £28,760 = £862.80 per year
More details: GOV.UK – Workplace pensions and employer contributions
Above-Minimum Contributions
Some employers go beyond the minimum contribution level. This might be part of:
- A more generous benefits package
- An effort to attract and retain top talent
- A commitment to employee wellbeing and financial security
These enhanced schemes might offer:
- Employer matching up to a certain percentage (e.g. matching 5% if the employee contributes 5%)
- Tiered contributions based on length of service or seniority
- Flexible contribution arrangements for employees who opt to contribute more
Employers can also offer salary sacrifice arrangements (sometimes called “SMART pensions”), where employees exchange part of their salary for increased pension contributions, often with tax and National Insurance savings for both parties.
Employers considering enhanced contributions or salary sacrifice should seek professional advice and ensure compliance with both pension and employment law.
