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Summary
UK workplace pensions require contributions from both employer and employee. Under auto-enrolment, the combined minimum is 8% of qualifying earnings (5% employee + 3% employer). Contributions receive tax relief, making pensions one of the most tax-efficient ways to save. The calculator shows how pension contributions affect your take-home pay and projects the pot size at retirement.
How it works
Auto-enrolment minimums
| Contributor | Minimum % of qualifying earnings |
|---|---|
| Employee | 5% (includes tax relief) |
| Employer | 3% |
| Total | 8% |
Qualifying earnings for 2025-26 are between the lower limit (£6,240) and upper limit (£50,270) of annual earnings.
Some employers calculate contributions on total gross salary instead, which usually results in higher contributions.
Tax relief methods
Relief at source:
- You contribute from your net (after-tax) pay
- The pension provider claims basic rate tax relief (20%) from HMRC and adds it to your pot
- Higher/additional rate taxpayers claim extra relief through Self Assessment
- Example: to contribute £100 gross, you pay £80 from salary, provider adds £20
Salary sacrifice (net pay arrangement):
- Your salary is contractually reduced before tax is calculated
- The employer pays the full amount into your pension
- All tax relief is applied immediately — no need to claim through Self Assessment
- Also saves employee and employer NI
The pension pot projection
The calculator projects your pot at retirement using:
Future pot = Contributions x ((1 + r)^n - 1) / r
Where r is the assumed annual growth rate and n is years to retirement. Typical assumptions: 5% growth (equities), 2-3% growth (bonds), minus fund charges.
Worked example
Salary: £40,000, Employee 5%, Employer 5%, relief at source
- Qualifying earnings: £40,000 - £6,240 = £33,760
- Employee gross contribution: £33,760 x 5% = £1,688
- Employee net contribution: £1,688 x 80% = £1,350 (from salary)
- Tax relief added by provider: £1,688 x 20% = £338
- Employer contribution: £33,760 x 5% = £1,688
- Total annual into pot: £1,688 + £1,688 = £3,376
- Monthly impact on take-home: -£112.50
Over 30 years at 5% growth: £3,376/year grows to approximately £237,000.
Inputs explained
- Gross salary — annual salary before deductions
- Employee contribution % — your pension contribution rate
- Employer contribution % — your employer’s contribution rate
- Contribution basis — qualifying earnings or total salary
- Relief method — relief at source or salary sacrifice
Outputs explained
- Monthly take-home impact — how much less you receive each month
- Total annual contribution — combined employee + employer + tax relief
- Projected pot at retirement — estimated pension fund at retirement age
- Tax relief value — how much free money the government adds
Assumptions & limitations
- The annual allowance for pension contributions is £60,000 (from 2023-24). Contributions above this limit face a tax charge. See the pension allowance calculator for details.
- The Lifetime Allowance has been abolished from April 2024, removing the cap on pension pot size.
- Pension growth projections assume a constant return and do not account for market volatility.
- Fund charges (typically 0.2-0.75% per year) reduce actual returns.
- You can typically access your pension from age 55 (rising to 57 from April 2028).