How does a workplace pension work?

A workplace pension is a pension arranged by your employer. A percentage of your pay goes in automatically every payday, your employer usually adds money too, and you may get tax relief from the government. Some are called occupational, works or company pensions.

Your employer must automatically enrol you and pay in if all of these apply:

You can usually still ask to join, and your employer cannot refuse. If you join voluntarily, your employer must pay in the minimum if you earn more than £520 a month, £120 a week or £480 over four weeks. Below that, the employer does not have to contribute.

In most automatic enrolment schemes, contributions are worked out on “qualifying earnings”: your pay between £6,240 and £50,270 a year before tax, including salary, bonuses, commission, overtime and statutory sick, maternity, paternity, adoption and parental pay.

The legal minimum is 8% of qualifying earnings in total. At least 3% must come from your employer and you pay the rest. Tax relief usually forms part of your share. GOV.UK’s example: you put in £40, your employer puts in £30 and tax relief adds £10, so £80 goes in.

Scheme rules can set higher contributions or use a different definition of earnings, and defined benefit schemes usually have higher contributions. Some employers pay more than the minimum, which can let you pay less as long as the total minimum is met.

Workplace pensions give basic-rate tax relief in one of two ways. Under “net pay”, your contribution is taken from your pay before tax, so you get relief at your highest rate automatically; people who earn too little to pay Income Tax get no relief this way. Under “relief at source”, your contribution is taken after tax and the provider adds 20% tax relief to your pot, even if you do not pay tax; higher and additional rate taxpayers can claim the extra.

Some employers offer salary sacrifice, where you give up part of your salary and the employer pays it into your pension. This can reduce the tax and National Insurance you and your employer pay. The government announced at Budget 2025 that from 06/04/2029, National Insurance will apply to salary-sacrificed pension contributions above £2,000 a year; the legislation has not yet been made.

You can leave (“opt out”). If you opt out within a month of being enrolled, you get back what you paid in. If you leave later, the money usually stays in the pension until you retire. Your employer must not encourage or force you to opt out.

You can ask to rejoin at any time, although an employer does not have to accept you back if you opted in and then out within the past 12 months. Employers must automatically re-enrol eligible staff who have opted out, every three years.

Your workplace pension still belongs to you when you leave. If you stop paying in, the money stays invested until the scheme’s pension age. You may be able to keep paying into it, or combine it with a new scheme; the providers can explain the options. The Pension Tracing Service can help find old pensions.

The Department for Work and Pensions kept the £10,000 earnings trigger and the £6,240 to £50,270 qualifying earnings band at their 2025/26 levels for 2026/27, to provide stability while the Pensions Commission (launched in July 2025) looks at pension adequacy, including automatic enrolment.

Whether to pay in more than the minimum depends on individual circumstances. MoneyHelper offers free, impartial guidance. Pension investments can fall as well as rise.