Workplace pensions: what auto-enrolment really costs you
Who is enrolled, and the 2026/27 numbers
Employers must enrol workers aged 22 to State Pension age who earn over £10,000 a year, and must contribute for anyone earning above £6,240 who opts in. All three thresholds are unchanged for 2026/27, and the reform that would count contributions from the first pound of earnings is passed but not yet switched on, so the band basis still applies. Contributions are a percentage of earnings between the band limits, not of your whole salary, which is why the real cost is lower than the headline 5% suggests.
The three ways tax relief arrives
| Method | How it works | Watch out |
|---|---|---|
| Relief at source | You pay from net pay, the provider adds 20% automatically | Higher-rate payers must claim the extra 20% or 25% via HMRC themselves; Scottish taxpayers can claim 1%, 22%, 25% or 28% extra on contributions matching income taxed at 21%, 42%, 45% or 48% |
| Net pay | Contribution leaves pay before tax, full relief automatic | Very low earners under the personal allowance historically missed the 20% top-up |
| Salary sacrifice | You give up salary, employer pays it into the pension | Best deal, saves National Insurance too, but can affect mortgage affordability checks and statutory pay |
Salary sacrifice is the version our UK salary calculator models: on £35,000 a 5% sacrifice cuts take-home by about £105 a month while £146 lands in the pot before employer money, because income tax, NI and any student loan all shrink. The salary sacrifice guide goes deeper.
Should you pay more than the minimum?
The 8% floor was designed as a floor, not a target. The usual priority order: capture every employer-matched pound first (an instant 100% return), then weigh extra contributions at your marginal rate, which the calculator shows live. The annual allowance is £60,000 for 2026/27, tapering for incomes above £260,000, so ordinary earners rarely hit it. General information, not financial advice.
Opting out
You can opt out within a month for a refund, and later by stopping contributions, but you also give up the employer's money and the tax relief, which is why opting out to raise take-home is usually the most expensive pay rise available. Employers must re-enrol you roughly every three years.
Frequently asked questions
Is the 8% charged on all my salary?
Under the standard basis, no: only on earnings between £6,240 and £50,270. Some employers voluntarily use full salary from the first pound, which your scheme booklet will say.
I earn £9,000. Do I get a pension?
You are not auto-enrolled, but you can opt in, and because you earn above £6,240 your employer must contribute their 3% share if you do.
Could the rules change soon?
The thresholds are frozen for 2026/27 by ministerial decision, and the first-pound reform remains uncommenced. Budgets can change pension tax rules prospectively, so we re-verify this page each tax year.
2026/27 thresholds per DWP and The Pensions Regulator; examples computed with our tested engine. Last updated 2026-11-04.