Auto-Enrolment: The Basics
Taken from your salary before or after tax depending on your scheme type.
Your employer must contribute at least 3% on top of yours.
Combined minimum of 8% goes into your pension pot each month.
Who Gets Auto-Enrolled?
Pension Tax Relief
The government adds money to your pension through tax relief. The amount depends on your tax bracket.
Basic Rate (20%)
For every £80 you contribute, the government adds £20, making it £100 in your pot.
Higher Rate (40%)
You can claim an additional 20% through Self Assessment or payroll adjustments.
Relief at Source vs Net Pay
Relief at Source: You pay from net salary, scheme claims 20% basic rate. Higher rate taxpayers claim extra via Self Assessment.
Net Pay: Contributions taken before tax, so you get full relief automatically. But non-taxpayers miss out on the 20% boost.
Salary Sacrifice Pensions
Salary sacrifice is an arrangement where you agree to a lower salary in exchange for higher employer pension contributions. This saves both Income Tax and National Insurance.
Example: £50,000 Salary, 5% Contribution
Benefits of Salary Sacrifice
Types of Pension
Defined Contribution (DC)
The most common type. Your contributions are invested and the final pot depends on investment performance.
- You control how much goes in
- Pot grows based on investments
- Flexible access from age 55
Defined Benefit (DB)
Also called "final salary" pensions. Rare in private sector but common in public sector (NHS, teachers, civil service).
- Guaranteed income for life
- Based on salary and years worked
- Index-linked to inflation
Annual Allowance
The maximum you can contribute to pensions each year with tax relief. Includes your contributions, employer contributions, and tax relief.
You can use unused allowance from the previous 3 years if you were in a pension scheme.
If you earn over £260,000 (adjusted income), your allowance reduces. Minimum is £10,000.