The minimum amount your employer has to contribute to your pension by law (until April 2018) is the equivalent of one per cent of a proportion of your earnings.
In April 2018 this will increase to two percent, then in April 2019 it will increase again to three per cent.
This minimum percentage does not apply to all of your earnings. It applies only to what you earn over a minimum amount (currently £5,824 a year, or £486 a month, or £448 four-weekly, or £112 weekly) up to a maximum limit (currently £43,000 a year, or £3,583 a month, or £3,308 four-weekly, or £827 weekly).
Your employer can contribute more than the minimum required by law if they want. Therefore, the way your employer actually calculates their contribution to your workplace pension could be different.
For example, your employer could choose to calculate their contribution to your pension based on the whole of your salary, and/or they could choose to contribute a higher percentage if they want.
If you’re already in a pension at work but it does not meet the new rules (for example, your employer pays in less than the minimum required), and you meet the age and earnings criteria, your employer will have to either change the existing pension scheme to meet the new rules or enrol you in a new scheme (one that meets the new rules).
If you earn less than the minimum amount (listed above) your employer does not have to contribute to your workplace pension. (They can choose to do so if they want).
Therefore, when using this calculator if you put in a figure the same or less than minimum listed above, you will get an output of £0.00.
If you earn more than the maximum limit (listed above), the minimum amount your employer has pay into your pension is based on the maximum limit, even if you earn more than that. Therefore, if you input a figure higher than the maximum limit, you will get an output based on the maximum limit not your actual salary.
No one will see them, store them or pass them on to anyone else.
If you earn over a certain amount (£11,000 a year), the government takes tax off your income. You can see this on your payslip. Tax relief means some of your money that would have gone to the government as tax now goes into your pension pot instead. Further information on how tax relief works can be found here.
If you are not a taxpayer, you may still be able to receive an amount as tax relief on your pensions contributions depending on how your employer’s pension scheme operates tax relief. Ask your employer or pension provider for more information.
For many people, paying into a workplace pension scheme is a good idea – even if they have other financial commitments, such as a mortgage or a loan. This is because you’re not the only one putting money in. Your employer has to contribute too, provided you earn more than the minimum amount listed above.
Most people will also get a contribution from the government in the form of tax relief.
Over time, this money adds up and can grow.
But you should make sure you can afford to meet your other commitments. If you’re behind on your mortgage, rent, credit card or other debt payments then a pension might not be the right step at the moment. It’s something you should come back to at a later date, once your debts are more under control.
If you start saving into a workplace pension but then a few months or years later you want to stop paying, you can do so. You might want to check with whoever runs your pension scheme what happens when you stop paying, and how to rejoin.
You can start paying into your employer’s scheme again at a later date, if you decide you want to. Your employer has to accept you into their pension scheme once in every twelve month period.
If you opt out or you stop making payments, your employer will automatically enrol you back into their pension at a later date. This is usually every three years. This is because your circumstances may have changed and it may be the right time for you to start saving. Your employer will contact you and you can choose to stay in the workplace pension or opt out.
If you’re struggling with debts and would like advice on how to manage your money, you might find the Money Advice Service a good starting point.
Pension incomes are determined by a variety of factors, including fund growth, annuity rates and work history. You will be able to get an estimate of your pension income from your pension provider. Some pension providers also have pension income calculators which also give you an indication of what you might get when you retire.
The Employer Contribution calculator is not designed for ‘Defined Benefit’ workplace pension schemes such as ‘final salary’ or ‘career average’ pensions. If you have this type of workplace pension you should check with your scheme provider to find out how much your employer has to contribute.