To keep things simple, let’s just look at auto-enrolment pensions and the way they are worked out. Anything below £5772.00 per annum isn’t taken into account as this is the Lower Earnings Limit. This doesn’t mean you have to earn £5772.00 before you will be enrolled, the figure for that is £10,000.00 per annum, this means that you deduct the lower earnings limit from your salary and that is what is pensionable pay.
Likewise, anything earned above £41,865.00 per annum will not be taken into account as this is the Upper Earnings Limit. This means if you are paid £50,000.00 per annum, for the purposes of calculating the pension it would be treated as £41,865.00 per annum. Here is the standard calculation for working out your workplace pension contributions based on this salary.
£50,000.00 > Upper Earnings Limit > £41,865.00
£41,865.00 – Lower Earnings Limit = £36,093.00
£36,093.00 – 20% Tax Relief = £28,874.40
£28,874.40 x 1% contribution = £288.74 annually
£288.74 / 12 months = £24.06 monthly
£288.74 / 52 weeks = £5.55 weekly
The Tax Relief will still get paid into your pension, so the actual amount going in will be £30.08 per month and it depends on your employer and what pension scheme they are running which amount gets shown on your payslip. The same amount would get paid into the pension pot by the employer. This is based on 1% contributions which is currently the minimum amount for all employees and employers currently enrolled in the workplace pension. From October 2017 the minimum contributions go up to 3% for employees and 2% for employers. From October 2018 the minimum contributions go up again to 5% for employees and 3% for employers.