Auto-Enrolment Explained
Minimum you must contribute from your qualifying earnings
Free money from your employer on top of yours
Combined minimum going into your pension each month
You're automatically enrolled if you're aged 22-State Pension age, earn over £10,000/year, and work in the UK. You can opt out, but you'll lose the employer contribution.
Types of Pension
Workplace Pension (DC)
Defined Contribution - you and employer contribute, invested for retirement
- Most common type
- Your pot grows with investments
- Value depends on market performance
Final Salary (DB)
Defined Benefit - pension based on salary and years of service
- Guaranteed income
- Rare in private sector
- Common in public sector
Personal Pension
Individual pension you set up yourself, e.g., SIPP
- Full control over investments
- Choose your own provider
- No employer contribution
State Pension
Government pension based on NI contributions
- £221.20/week (full amount)
- Need 35 qualifying years
- Claim from State Pension age
Pension Tax Relief
One of the biggest benefits of pensions is tax relief. The government effectively adds money to your pension based on your tax rate:
| Tax Rate | Pension Gets | Actually Costs You | Tax Relief |
|---|---|---|---|
| Basic (20%) | £100 | £80 | £20 |
| Higher (40%) | £100 | £60 | £40 |
| Additional (45%) | £100 | £55 | £45 |
Pro tip: Higher and additional rate taxpayers need to claim extra relief through Self Assessment. Basic rate relief is added automatically by your pension provider.
Salary Sacrifice vs Relief at Source
Salary Sacrifice (Better)
- Save Income Tax AND National Insurance
- Employer saves NI too (often passed to you)
- No need to claim higher rate relief
- Can help avoid 60% tax trap
Relief at Source
- Save Income Tax only (not NI)
- Higher rate relief needs Self Assessment
- Doesn't affect your contractual salary
- Better for some benefits calculations
Use our Salary Sacrifice Calculator to see exactly how much you could save.
Related Calculators
Related Glossary Terms
Frequently Asked Questions
Plan Your Retirement
Use our pension calculators to see how your contributions grow and how much tax relief you'll receive.