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Calculating contributions using different elements of staff pay

If you calculate contributions using different elements of staff pay, you will need to use the tables below to work out which minimum contribution increases apply to you.

By law a total minimum amount of contributions must be paid into the pension scheme. You, the employer, must make a minimum contribution towards this amount and your staff member must make up the difference. If you decide to cover the total minimum contribution required, your staff won’t need to pay anything.

There are three ways of working out the minimum contribution increases using different elements of staff pay. These are known as sets. The staff contribution rates may vary depending on the type of tax relief applied by your scheme. If you are unsure which set applies to your scheme check with your provider.

Set 1: contributions calculated on gross earnings

You calculate contributions based on gross earnings. You don’t include bonus, overtime, commission or certain staff allowances (such as shift pay or relocation allowance) in the calculation.

Date effective Employer minimum contribution Staff contribution Total minimum contribution
Until 5 April 2018 2% 1% 3%
6 April 2018 to 5 April 2019 3% 3% 6%
6 April 2019 onwards 4% 5% 9%

Set 2: contributions calculated on gross earnings based on 85% of total earnings

You calculate contributions based on gross earnings. You don’t include bonus, overtime, commission or certain staff allowances (such as shift pay or relocation allowance) in the calculation. You will have checked that the gross earnings for all staff in the scheme when added together were at least 85% of their total earnings

Date effective Employer minimum contribution Staff contribution Total minimum contribution
Until 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

Set 3: contributions calculated on all earnings

You calculate contributions based on ALL elements of staff pay AND all earnings.

Date effective Employer minimum contribution Staff contribution Total minimum contribution
Until 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 4% 7%

Pension schemes that don’t require an increase in minimum contributions

If you’re using a defined benefit scheme then the increases do not apply. Defined benefit schemes are mainly used by large employers and employers in the public sector and are sometimes known as ‘Final Salary Schemes’ or ‘Career Average Schemes’. If you are unsure if this applies to you check your scheme documents or if you are still unsure speak to your scheme provider.

If you are using a hybrid scheme (a combination of defined benefit and minimum contributions) you will need to make increases to the minimum contributions section of the scheme.

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