Workplace Pension Calculator 2025/26

Understanding Workplace Pensions in 2025/26

Workplace pensions became mandatory for UK employers under auto-enrolment rules. Understanding how contributions are calculated helps both employers budget correctly and employees plan for retirement.

Auto-Enrolment Requirements

All UK employers must automatically enrol eligible workers into a pension scheme. Workers are eligible if they:

• Are aged between 22 and State Pension age (66)
• Earn at least £10,000 per year
• Work in the UK

Minimum Contribution Rates

The law sets minimum contribution levels that must be met:

Qualifying Earnings vs Total Earnings

There are different ways to calculate the earnings on which pension contributions are based:

Qualifying Earnings Scheme

Contributions are calculated on earnings between the lower limit (£6,240) and upper limit (£50,270). This is the most common approach and results in lower overall contributions.

Total Earnings Scheme

Contributions are calculated on the full salary from the first pound. This results in higher contributions but better retirement outcomes.

The Benefits of Salary Exchange

Salary exchange (sometimes called salary sacrifice) is an arrangement where employees agree to reduce their salary in exchange for larger employer pension contributions. The benefits include:

• Employee savings: Lower salary means lower National Insurance payments
• Employer savings: Employers also save on NI contributions
• Tax efficiency: More money goes into the pension pot

Many employers pass on some of their NI savings to employees in the form of increased pension contributions, making this a win-win arrangement.

Employer Responsibilities

Employers must:

• Set up and maintain a qualifying pension scheme
• Automatically enrol eligible workers
• Make minimum employer contributions
• Re-enrol opted-out workers every 3 years
• Keep records and complete declarations of compliance