Calculating contributions
In this section
How do I calculate my contributions using certification?
You can choose to calculate contributions in a way that meets the requirements of one of the three sets described in the legislation. Each of the three certification sets have different minimum contribution rates.
Although current guidance talks about sets of contribution levels, you’ll find that we refer to them as tiers on our system. This is the term previously used by the Pensions Regulator (TPR) in their guidance.
You can find more information on certification and access the Template certificate on Department for Work and Pensions website. You’ll need to keep a copy of your certification for six years after its expiry. You’ll also need to make it available to The Pensions Regulator (TPR), or any of your workers on request.
Pensionable earnings must be at least equal to the worker’s basic pay. This is a worker’s pay from the first pound. It generally excludes overtime, bonuses, and commission.
Minimum contribution rates are 9% with the employer paying at least 4%. For example, if a worker’s basic salary is £100, you’ll need to calculate employer contribution as 4% of £100, which is £4 and worker contribution is 5% (less 1% tax relief), which is £4.
Total pensionable earnings of all workers must be at least 85% of their total earnings. Total earnings means everything paid to a worker including salary, commission, bonuses and overtime, performance related pay and any other earnings you have paid the jobholder. It also includes statutory sick, maternity, paternity, and adoption pay. The pensionable earnings must be equal to or more than the worker’s basic pay.
Their minimum contribution rates are 8% with the employer paying at least 3%. For example, if a worker’s gross pay is £500, you’ll need to calculate 85% of the gross salary that is £425. The employer contribution will be calculated as 3% of £425 which is £12.75 and worker contribution will be calculated as 5% (less 1% tax relief) which is £17.
Set 3 includes all earnings in pensionable earnings, which means you need to include wages, commission, overtime, bonuses, performance-related pay and any other earnings you’ve paid the jobholder.
Their minimum contribution rates are 7% with the employer paying at least 3%. For example, if a worker’s gross pay is £500, you’ll need to calculate employer contribution as 3% of £500 which is £15 and worker contribution as 4% (less 0.8% tax relief) which is £16.
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