Contributions to Your Employees’ Personal Pension Scheme

If you offer your employees access to a personal pension, you can leave out commission, overtime and bonuses when you are calculating the 3 per cent minimum of basic pay that you contribute to your employee’s personal pension.

For example, you and your employee could both put in 5 per cent. The total amounts must, however, be within HMRC limits for how much you and your employee can contribute to a personal or Stakeholder pension in a year.

Contributions may be up to 100 per cent of earnings, up to a maximum of £245,000 per year during 2009/10, rising to £255,000 in 2010/11.

annual allowance

You must pay your employer contribution to the personal pension scheme provider, plus the employee contributions, within the stringent time limits.

You do not have to provide access to a Stakeholder pension scheme for any employee:

  • Who has worked for you for less than three months in a row;
  • Who is a member of your occupational pension scheme;
  • Who cannot join your occupational scheme because its rules don’t admit people if they are under 18 or they are within five years of the scheme’s normal pension age;
  • Who could have joined your occupational pension scheme but decided not to;
  • Whose earnings have fallen below the National Insurance lower earnings limit for one or more weeks within the last three months;
  • Who cannot join a Stakeholder Pension Scheme because of HMRC restrictions (e.g. the employee does not normally live in the United Kingdom).