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You should receive employer contributions if you've been auto-enrolled in a workplace pension.
What is an employer contribution?
Simply put – an employer contribution is a payment made into a pension of an employee, by their employer. Employer contributions are paid gross (before any deductions for tax).
An employer contribution is normally treated as an allowable expense for corporation tax – just like a salary payment. But unlike a salary payment, employers don't have to pay national insurance on employer pension contributions.
Can my employer pay into my pension?
We can accept both Self-invested personal pension (SIPP) and Ready-made pension employer contributions – but please note that neither are workplace schemes or company accounts.
How are employer contributions paid into my pension?
Once you’ve opened an account with us, we can accept an employer contribution to your SIPP or Ready-made pension by bank transfer or direct debit.
Employer contributions can be set up as regular or one-off payments.
To set up regular contributions, ask your employer to complete our employer monthly contribution form.
For a one-off amount, you can make a single payment request through your account. Once confirmed, we’ll provide you with payment details to give to your employer, so they can pay into your account.
See more details on how the process works
Can I make employer contributions if I run my own business?
If you own your business and it’s a limited company, you can pay an employer contribution to a SIPP or Ready-made pension. As employer contributions are deducted from your total profits, they won’t be liable for corporation tax. Read more about pensions for the self-employed.
If you’re a partnership or sole trader, any pension contributions for your employees can be treated as a business expense and set off against your income tax liability – so they’re also not subject to national insurance.
It’s important to keep in mind that the contributions must be commercially reasonable for the business. While most pension contributions won’t be challenged, HMRC may question the payments if they find them excessive. If you’re not sure about your situation, please consult a regulated financial adviser or tax specialist.
Do employer contributions count towards my annual allowance?
Employer pension contributions count towards your annual allowance.
The annual allowance is usually £60,000 per person, per tax year but can be lower if you have income over £260,000 or you’ve accessed your pension already.
You might be able to carry forward unused allowances from up to three previous tax years if you have exceeded the annual allowance for the current tax year and haven't accessed your pension yet. See our article on pension contributions for more details.
What is salary sacrifice?
You can also ask your employer to consider making payments via salary exchange (also known as salary sacrifice) to your pension. This is a formal agreement to exchange part of your salary for a pension contribution and can be very tax efficient if it is right for your circumstances. You can read more in our case study below.
Case study: Harry can grow his pension pot faster if his employer contributes to it
Harry earns £45,000 a year. He’s just had a pay rise of £1,500 and wants to save all this additional pay into a SIPP to boost his retirement savings.
In the first month he earns an extra £125 gross. On this he pays £25 income tax and £10 national insurance, leaving him with additional net earnings of £90. He pays this into his SIPP, and we then claim tax relief at 20%, which is £22.50. Harry ends up with £112.50 extra in his SIPP.
Alternatively, Harry could ask his employer to exchange his additional pay under salary sacrifice for a SIPP employer contribution of £125 a month directly into his SIPP. If the employer is willing to do this, we wouldn’t be able to reclaim any tax relief (as the contribution would be a gross employer payment), but he would end up with £125 in his pension.
So, by receiving employer pension contributions Harry can save £125 a month or £1,500 a year towards his pension – against saving £1,350 a year when making personal contributions. This is an extra £150 a year.
Another perk of salary sacrifice is that your employer doesn't have to pay employer's national insurance on the part of your salary they pay into your pension – and they may choose to pass some of this benefit onto you.
But not every employer offers salary sacrifice, so you need to check. You should be aware that tax rules can change, and the benefits depend on your individual circumstances.
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Important information: Remember that the value of investments can change, and you could lose money as well as make it. We don't offer advice, so it's important you understand the risks. If you're not sure, please speak to a financial adviser. These articles are for information purposes only and are not a personal recommendation or advice. Tax treatment depends on your individual circumstances and rules may change. Pension rules apply.