Auto-enrolment earnings thresholds

What is pensions auto-enrolment? What are the contribution limits and earnings thresholds for employer pension automatic enrolment?

This is a freeview 'At a glance' guide to auto-enrolment earnings thresholds. 

Click here for detailed guidance to auto-enrolment (subscriber version) together with links to sample letters for clients.

Contribution levels

Under pensions automatic enrolment, both employee and employer make regular contributions to the employee's pension scheme.

The minimum total contribution, which is made up of employer's and employee's contributions inclusive of tax relief, is based on a percentage applied to earnings above the threshold up to the upper limit, which is linked to the National Insurance thresholds. The percentages increased during the transitional 'phasing' period as follows;

For example:

John earns £12,570 per annum. If his employer was required to auto-enrol him in 2023-24 the employer and employee will have to contribute a minimum of 8% of his salary in excess of the lower earnings threshold of £6,240, giving a contribution of £499.20 in total, of which at least half must be contributed by the employer. 

Note that the increases in total contributions to 5% and then 8% were originally due to take place in October 2017 and October 2018.  The six-month delay to align the increases with the tax year was announced at the Autumn Statement 2015.

There is an alternative contribution model, the pensionable earnings basis

Pensionable earnings are the higher of:

1. The employer's definition of pensionable earnings, and
2. Basic pay (which excludes variable elements of pay such as commission, bonuses, and overtime)

Under the pensionable earnings basis, contributions are based on the employee's earnings from £1 upwards and not by reference to earnings within the bandings.

Employers using a defined contribution scheme can choose not to base contributions on banded earnings if they satisfy one of the following minimum contributions requirements.

Earnings thresholds

You are automatically enrolled into your employer's pension when your earnings trigger the qualifying earnings thresholds.