Contributions Levels

The contribution levels have now been confirmed at a minimum of 8% of qualifying (band) earnings.

This is made up of 3% employer, 4% employee and 1% from the Government in the form of tax relief.

It is proposed that contributions will be phased in as follows:

    Year     
 Employer
    Employee
     Tax Relief   

Year 1

1%

1%

0.25%

Year 2

2%

3%

0.75%

Year 3

3%

4%

1.00%


Tax relief at source will be added to all employee contributions at basic rate.  In year 3, this will amount to 1% of band earnings.

In reality, the contribution required to be made is 6.8% of full earnings (8% of £5,035 to £33,540 (band earnings)).  This can be split 2.64% from the employer, 3.4% from employee and 0.76% in tax relief.  The actual percentage contribution reduces for lower earners and could be as low as 0.000016% for those earning £5,036 per annum !
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