Currently the plans are for the minimum pension contributions to remain at 2% (1% Employee contribution,
1% Employer contribution or the employer can pay the full 2% with 0% Employee contributions) until April
2018. The pension contributions are based on qualifying earnings (which is pay above £5824 Gross per annum
or £486 Gross per month). Your employee will also receive tax relief on their contribution once it hits the pension pot, therefore the employee calculation for contributions would be based on 0.8% initially.
For example: Based on the levels of pay £1000 Gross per month, the minimum contributions would be based
on the qualifying earnings of £514. The contributions would calculate as follows:
0.8% Employee contribution = £4.12 per month. This would be taken from your employee’s NET pay; the
government would add 0.2% tax relief each month to make 1%.
1.0 % Employers Contribution = £5.15 per month. This would be a cost you in addition to your employee’s
gross pay.
The contribution rates are due to increase from April 2018 to 2% Employer, 3% Employer, from April 2019 to
3% Employer, 5% Employee.