UK auto-enrolment is the legal duty (since 2012) for employers to put eligible workers into a workplace pension automatically. In 2026/27 the minimum total contribution is 8% of "qualifying earnings": 5% from the employee (with tax relief), 3% from the employer. Eligibility kicks in at age 22 and £10,000 of annual pay. Opting out is allowed but rarely sensible.
Who gets auto-enrolled
You must be enrolled if all three apply:
- Age 22 or over, but under State Pension age
- Earning more than £10,000 a year from that employer (or pro rata for shorter pay periods)
- Working in the UK
If you're 16-21 or 22+ earning under £10,000, you can opt in voluntarily and your employer must enrol you — with the same minimum contributions. This is particularly valuable for under-22s with a long career ahead: starting auto-enrolment contributions at 18 instead of 22 can add £50,000+ to retirement pots.
The 8% contribution split (2026/27)
| Source | Rate | Notes |
|---|---|---|
| Employee | 5% | 4% net + 1% basic-rate tax relief = 5% gross |
| Employer | 3% | Free money. The reason opting out is usually a bad idea. |
| Total | 8% | Of qualifying earnings |
"Qualifying earnings" in 2026/27 means the slice of pay between £6,240 and £50,270. So an employee earning £30,000 has qualifying earnings of £30,000 − £6,240 = £23,760, and the 8% × £23,760 = £1,901/yr goes into the pension.
Tax relief — how the employee 5% really works
There are three different ways UK pension schemes apply tax relief:
- Net pay arrangement — contribution comes from pre-tax salary. Your taxable income reduces by the contribution, saving income tax at your marginal rate. NI is still paid on the full salary unless salary sacrifice is in place.
- Relief at source (RAS) — contribution comes from net (post-tax) pay. The pension provider claims back basic-rate (20%) tax relief and adds it to your pot. Higher-rate / additional-rate taxpayers claim the extra 20% / 25% via Self Assessment.
- Salary sacrifice — strictly not a "tax relief" — your gross salary is reduced and your employer pays the equivalent into the pension. Saves both income tax AND NI on the sacrificed amount.
For most auto-enrolment schemes, net pay or RAS is the default. Salary sacrifice is usually the most efficient if your employer offers it — the NI saving (8% basic-rate / 2% above £50,270) is on top of the income tax relief.
Should you ever opt out?
The default answer is no. Opting out gives up:
- The 3% employer contribution — forever, no way to recover
- The 1% basic-rate tax relief on your contribution
- Decades of compound growth on the pot
For most workers, the lifetime cost of opting out is ~£200,000-£300,000 of foregone retirement wealth. The break-even between "lower take-home now" and "more pension later" is typically reached within 5-10 years even at conservative investment returns.
See how a pension grows with auto-enrolment
The pension calculator projects your future pot using auto-enrolment contributions (or higher), assumed growth and your expected retirement age.
Open the pension calculator →Sources and methodology
Auto-enrolment rules from thepensionsregulator.gov.uk and gov.uk/workplace-pensions. Qualifying earnings thresholds from gov.uk automatic-enrolment-review.
UK Tax Drag is not authorised by the Financial Conduct Authority and does not provide regulated financial advice — see the content disclaimer for the full position. The methodology page documents how every calculator is built and reviewed.
Related
- Pension calculator — project the pot at retirement
- Salary sacrifice calculator — see how it boosts pension contribution efficiency
- Workplace pension explained — the full deep-dive guide
- Lost pension admin checklist — recover old pots if you've had multiple employers
- Full UK money glossary
- FAQ library
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