Employer pension contributions made simple

Getting your head around employer pension contributions can feel a bit much at first – automatic enrolment, pension providers, minimum contributions – it’s a lot to take in. But don’t worry, we’re here to break it all down for you. Whether you’re an employer setting up a pension scheme or an employee wanting to understand how contributions affect your future, this guide should give you the answers you need to feel confident about what’s next..

This guide covers:

• How much do employers have to contribute?
• Who needs to be enrolled?
• When do contributions need to be paid?
• Why does record-keeping matter?
• The ‘wholly and exclusively’ rule explained

How much do employers have to contribute?

One of the biggest questions employers ask is: “How much do I actually need to pay?”

If you’re an employer, by law, you have to contribute at least 3% of your employees’ qualifying earnings into their pension. Combined with their contribution, the total needs to be at least 8% of their earnings.

This is part of the government’s automatic enrolment scheme, which is all about making sure workers have a safety net for retirement. It’s a team effort – you, as the employer, chip in alongside your employees to help them build up their pension savings for the future.

How do automated payroll systems help?

Thankfully, if you use an automated payroll system, a lot of the hard work is done for you. These systems calculate the pension contributions and deduct them directly from your employee’s pay.

It keeps everything ticking over smoothly and helps you meet your legal obligations without too much hassle.

Who needs to be enrolled?

Under UK law, you need to enrol any employee who meets these criteria:

• Aged between 22 and the State Pension age.
• Earns over £10,000 a year.
• Works in the UK.

When do contributions need to be paid?

Paying pension contributions on time is really important. It shows your employees that you’re serious about supporting their financial future. By law, any contributions you deduct from your employee’s wages need to reach their pension fund by:

• The 22nd of the month after deduction (if you pay electronically).
• The 19th of the month after deduction (if you’re paying by cheque).

Keeping up with this timeline keeps you compliant and builds trust with your team.

Why does record-keeping matter?

As an employer, you should keep records of pension contributions for six years. It might sound tedious, but it’s a key part of making sure everything adds up.

Having these records means you can:

• Double-check any calculations if needed.
• Provide proof of payment if there are any questions later.
• Prepare for audits or disputes.

Worried about a mis-sold final salary pension?

If you’re concerned you may have been given bad advice about transferring out of a final salary pension scheme, you’re not alone. Mis-sold final salary pensions can have a lasting impact on your financial future, but there’s help available. At Spencer Churchill Claims Advice, we can review your situation and help you understand if you have a claim. Don’t let poor advice go unchallenged – reach out to our team today for clear, straightforward guidance.

The ‘wholly and exclusively’ rule explained

When it comes to tax relief on employer pension contributions, there’s one golden rule: the money you pay into an employee’s pension pot must be for business reasons only. Most of the time, this is straightforward – pension contributions for employees are a normal part of running a business. HMRC generally allows tax relief on these payments without a hitch.

However, if it looks like a pension payment is being made for personal reasons (e.g., for someone closely connected to you or your business), you might not get that tax benefit. There are clear scenarios where contributions are always considered a legitimate business expense:

• If they’re part of a salary or bonus swap (where an employee takes less pay in exchange for pension contributions).
• If you’re offering a standard contribution rate to all employees, like matching 5% of their pay.
• If you’re contributing to meet legal obligations, like closing a defined benefit pension scheme.

In these cases, you’re clearly supporting the business and your team, so tax relief applies.

Protect your pension with Spencer Churchill Claims Advice

If you’re worried that you’ve been given bad advice about your pension – particularly if it involves transferring out of a final salary pension scheme – it’s important to act quickly. Mis-sold final salary pensions can leave you worse off in retirement, but you don’t have to face this alone.

At Spencer Churchill Claims Advice, we specialise in helping people who’ve been mis-sold final salary pensions. Our team will listen to your story, explain your options, and work hard to help you reclaim what’s rightfully yours. Get in touch with us today for a free, no-obligation chat – your financial future matters, and we’re here to help you protect it.