Workplace Pension Guide UK 2025: Auto-Enrolment, Contributions & More

What Is Auto-Enrolment?

Auto-enrolment is the legal requirement for UK employers to automatically enrol eligible workers into a qualifying workplace pension scheme. The system was introduced by the Pensions Act 2008 and phased in from October 2012, starting with the largest employers. By February 2018, all employers — including the smallest — were obligated to comply.

The principle behind auto-enrolment is simple: rather than requiring workers to actively opt in to a pension, the default is that they are enrolled. Research by behavioural economists confirmed that most people do not actively seek out pension savings, especially early in their careers. By making enrolment automatic, participation rates in workplace pension schemes jumped from around 55% before 2012 to over 88% by 2024, according to the Office for National Statistics (ONS).

Auto-enrolment is overseen by The Pensions Regulator (TPR), which monitors compliance and can issue fines to employers who fail to meet their obligations. As of 2025, over 2.7 million employers have complied with auto-enrolment duties, covering approximately 22 million employees.

Who Gets Automatically Enrolled?

Not all workers qualify for auto-enrolment. Your eligibility depends on your age and earnings:

Eligible Jobholders (Automatically Enrolled)

• Aged between 22 and State Pension age
• Earning more than £10,000 per year (£833.33/month or £192.31/week)
• Working or ordinarily working in the UK

Non-Eligible Jobholders (Can Opt In with Employer Contributions)

• Aged 16 to 21, or State Pension age to 74
• Earning between £6,240 and £10,000 per year
• If you opt in, your employer must contribute at the minimum rate

Entitled Workers (Can Join, No Employer Contribution Required)

• Any age from 16 to 74
• Earning below £6,240 per year
• You can join a pension scheme, but the employer is not required to contribute

Opt-Out Rules

If you are auto-enrolled, you have the right to opt out. You must do so within one month of being enrolled. If you opt out in time, your employer must refund any contributions already deducted from your pay. After this one-month window, you can still stop contributing but may not receive a full refund.

Importantly, even if you opt out, your employer must re-enrol you every three years (on your re-enrolment date). You can opt out again, but this process repeats every three years. This ensures workers regularly reconsider their decision to opt out.

Contribution Rates 2025/26

The minimum contribution rates for workplace pensions in 2025/26 remain at the levels set in April 2019:

The employee contribution of 5% includes basic rate tax relief of 1%. For every 80p you contribute from your take-home pay, the government tops up to £1.00 (basic rate taxpayer). Higher-rate taxpayers can claim additional relief through self-assessment.

Qualifying Earnings Explained

Contributions are not calculated on your full salary. Instead, they are based on qualifying earnings — the band of income between a lower and upper threshold set by the government each tax year.

For 2025/26, qualifying earnings are calculated on income between £6,240 and £50,270 per year. This means:

• The first £6,240 of annual earnings is excluded from contribution calculations
• Earnings above £50,270 are also excluded
• Maximum qualifying earnings band: £50,270 - £6,240 = £44,030

Qualifying earnings include salary, wages, commission, bonuses, overtime, and statutory pay (sick pay, maternity/paternity pay).

Note: Some employers use a different contribution basis, such as total earnings (no lower threshold) or basic salary only. Always check your employment contract and pension scheme rules to understand how your contributions are calculated.

Employer Matching and Enhanced Contribution Schemes

The legal minimums are just a starting point. Many UK employers offer significantly more generous pension contributions, particularly as a way to attract and retain talent. Here are some well-known examples:

Tip: Always contribute at least enough to get your full employer match. Failing to do so is effectively leaving part of your salary on the table. If your employer offers to match up to 6%, contribute 6% yourself to receive the maximum free contribution.

Salary Sacrifice: The Tax-Efficient Way to Pension Save

Salary sacrifice (also called salary exchange) is an arrangement where you agree to reduce your gross salary, and your employer pays the equivalent amount directly into your pension as an additional employer contribution. This is perfectly legal and endorsed by HMRC.

Why Salary Sacrifice Is Beneficial

• You pay less National Insurance (NI): Because your salary is reduced, NI is calculated on a lower amount. Basic rate employees save 8% NI on the sacrificed amount (2025/26 rates); higher earners save 2%.
• Your employer pays less NI: The employer saves 13.8% employer NI on the sacrificed amount. Many employers pass these savings into your pension.
• Income tax relief: The contribution comes from your gross salary before tax, so you benefit from full tax relief automatically — no need to claim through self-assessment.

Salary Sacrifice Considerations

• Your contractual salary is reduced, which can affect mortgage affordability assessments and certain benefits linked to salary
• It cannot take your salary below the National Living Wage (£12.21/hour from April 2025)
• It is not available if you receive certain means-tested benefits — check with a financial adviser
• Maternity pay and other statutory pay may be affected if based on reduced salary

Defined Contribution vs Defined Benefit Pensions

There are two main types of workplace pension. Understanding which type you have is crucial for retirement planning.

Defined Contribution (DC) Pensions

Also called money purchase pensions, DC schemes are the most common type for new workplace pensions set up after 2000. Both you and your employer contribute to a personal pot, which is invested in funds (typically stocks and bonds). The value of your pot depends on:

• Total contributions made (yours and employer's)
• Investment performance over time
• Charges deducted by the pension provider

At retirement, you use your pot to provide income — through drawdown, an annuity, or lump sums. There is no guaranteed income; everything depends on how much has been saved and investment returns.

Defined Benefit (DB) / Final Salary Pensions

DB pensions are predominantly found in the public sector (NHS, teachers, civil servants, police, armed forces) and some older private sector schemes. They pay a guaranteed income for life at retirement, calculated using a formula:

Annual pension = Accrual rate x Years of service x Salary

For example, a 1/60th accrual rate with 30 years of service on a final salary of £40,000 gives: 30/60 x £40,000 = £20,000/year guaranteed for life, indexed to inflation.

DB pensions are extremely valuable and generally should not be transferred out without careful regulated financial advice. If the cash equivalent transfer value (CETV) exceeds £30,000, you are legally required to take advice from a regulated adviser before transferring.

NEST: The Government-Backed Pension Provider

The National Employment Savings Trust (NEST) was created by the government to ensure every employer has access to a qualifying pension scheme for auto-enrolment purposes. NEST must accept any employer who wants to use it, regardless of size or workforce demographics.

NEST manages over £45 billion in assets (2024) and covers around 13 million members. It offers:

• No charge for employers to use
• Annual management charge (AMC): 0.3% of funds under management
• Contribution charge: 1.8% on contributions made (to recoup government setup costs)
• A range of investment funds including ethical options
• Online portal for both employers and employees

NEST is not necessarily the best option for all workers — some private providers offer lower charges. However, its universal access obligation makes it the scheme of last resort for small employers or those with transient workforces.

What Happens When You Leave Your Employer?

When you change jobs, your workplace pension pot does not disappear. Here are your options:

1. Leave It Where It Is (Deferred Member)

You become a deferred member of your former employer's pension scheme. Your pot stays invested and continues to grow. You will receive an annual statement showing its value. Most people end up with several deferred pension pots across different employers throughout their career.

2. Transfer to Your New Employer's Scheme

If your new employer's pension scheme accepts transfers, you can consolidate your old pot into your new scheme. This simplifies administration and means you track one pot rather than many. Always check for exit charges on your old scheme before transferring.

3. Transfer to a Personal Pension (SIPP)

You can transfer to a Self-Invested Personal Pension (SIPP) or a stakeholder pension. This gives you more investment choice and may reduce charges. Always compare total charges before transferring.

4. Death in Service Benefit

Many workplace pension schemes include a death in service benefit — a lump sum paid to your beneficiaries if you die while employed. This is typically 2-4x your annual salary, separate from your pension pot. This benefit usually ends when you leave the employer. Check your scheme details and nominate beneficiaries.

Important: If you leave a DB scheme with fewer than two years of service, you may receive a refund of your own contributions instead of a deferred pension. After two years, you are entitled to a preserved (deferred) pension.

How to Find Lost Workplace Pensions

It is estimated that there are over £26.6 billion in lost and forgotten pensions in the UK, with an average lost pension value of approximately £13,000. Pensions get lost because people move house, change jobs frequently, or simply forget to keep their pension providers updated.

Free Government Pension Tracing Service

The government offers a free Pension Tracing Service that can locate the contact details of any UK workplace or personal pension scheme. Visit gov.uk/find-pension-contact-details or call 0800 731 0193.

You will need to provide:

• Your former employer's name
• The approximate dates you worked there
• Your National Insurance number (helpful)

Other Methods

• Contact HMRC: Your employment records held by HMRC can help identify pension schemes linked to previous employment
• The Pensions Advisory Service (MoneyHelper): Free impartial guidance at moneyhelper.org.uk
• Check old payslips: Deductions labelled "pension" will show the scheme provider
• Pensions Dashboard (2026): The government is developing a unified dashboard where you will be able to see all your pension pots in one place

For more guidance on tracing pensions, see our dedicated Pension Tracing Guide.

Workplace Pension Provider Comparison

The key metrics to compare when evaluating pension providers include:

• Annual Management Charge (AMC): The percentage of your pot charged each year. Look for under 0.75% (the default fund charge cap for auto-enrolment)
• Fund range: The variety of investment options, including ethical/ESG funds
• Default fund performance: How the scheme's default investment strategy has performed over 5 and 10 years
• Online tools and app quality: Ease of managing contributions, checking balance, changing investments
• Customer service: Accessibility and quality of support
• Employer integration: How easily the scheme connects with your employer's payroll

Major providers in 2025 include Nest, Aviva, Legal & General, Standard Life, Royal London, The People's Pension, NOW: Pensions, and Aegon. Each has strengths for different types of employer and workforce.

How to Maximise Your Workplace Pension

1. Contribute at least enough to get the full employer match. If your employer matches 6%, contribute 6% yourself.
2. Use salary sacrifice if available — it reduces your NI liability and may bring employer NI savings into your pot.
3. Review your investment fund choice. The default fund is appropriate for most, but higher-risk funds may be suitable earlier in your career.
4. Increase contributions when you get a pay rise. Even 1-2% more can make a substantial difference over decades.
5. Consider additional voluntary contributions (AVCs) to boost your pot beyond the minimum.
6. Keep your provider updated with address and contact details to avoid becoming a lost pension statistic.
7. Review your pension annually — check the value, performance, and whether your fund choice still reflects your retirement timeline.

Use our Pension Pot Calculator to see how different contribution levels and investment returns affect your projected retirement pot.

Frequently Asked Questions