What pension contribution rates does an employer have to make?

This depends on the earnings definition that the company is using to calculate the contributions. To be compliant the company can use one of the 4 salary definitions in the table below and must meet the contribution levels set out for each. The minimum contribution levels will increase gradually over 3 transitional periods:

  AE Minimums Set 1 Set 2 Set 3
Salary Definition Qualifying Earnings (£5,824 to £43,000 in 2016/17 tax year) Basic Salary Pensionable Earnings* Total Earnings
First Transitional Period Staging Date to 5 April 2018 Total 2% (Min. Employer 1%) Total 3% (Min. Employer 2%) Total 2% (Min. Employer 1%) Total 2% (Min. Employer 1%)
Second Transitional Period 6 April 2018 to 5 April 2019 Total 5% (Min. Employer 2%) Total 6% (Min. Employer 3%) Total 5% (Min. Employer 2%) Total 5% (Min. Employer 2%)
Steady State 6 April 2019 Onwards Total 8% (Min. Employer 3%) Total 9% (Min. Employer 4%) Total 8% (Min. Employer 3%) Total 7% (Min. Employer 3%)

Pensionable Earnings under Set 2 must be equal to or greater than Basic Salary and at least 85% of total earnings across the scheme.

If the employer meets the total minimum contribution requirement, then there will be no requirement for the employee to contribute, however they can do so if they wish.

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