The rate of contributions will depend on the scheme you join.
Your employer will pay contributions into the pension scheme, and you may have Employee Contributions deducted straight from your pay too, depending on the scheme being used. If your employer has decided to use Your Island Pension (YIP) or another scheme that follows the Minimum Contributions these will gradually increase until you are paying 6.5%. Your employer can determine the level of Employee Contributions and Employer Contributions they wish to offer as part of their overall remuneration package. To comply with the Law, they must offer at least the Minimum Contributions.
The amounts paid by you will depend on the scheme you are enrolled into. If your employer has chosen a scheme that is using the Minimum Contributions or they are using YIP, the table below shows the percentage rate that will apply in each year after the Law is implemented. For example, if your employer enrols you into a pension scheme in 2026, then your Minimum Employee Contribution on joining the pension scheme will be 1.5%.
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | |
| Employer | 1% | 1% | 1% | 2% | 2% | 3% | 3% | 3% | 3.50% |
| Employee | 1% | 1% | 1.50% | 2% | 3% | 4% | 5% | 6% | 6.50% |
| Overall | 2% | 2% | 2.50% | 4% | 5% | 7% | 8% | 9% | 10% |
Your employer can pay all the Employee Contributions for you so you have nothing deducted from your pay.
If you wish to pay Additional Voluntary Contributions (also known as AVC) by paying a lump sum or increasing the amount you contribute, you will need to speak to your Pension Provider to find out if this is possible. Making these contributions won't mean that your employer will be paying less as they will still need to pay at least the Minimum Contribution.
How are the contributions calculated?
- Secondary Pension contributions are a percentage of your earnings.
- The calculation of earnings used for Secondary Pension contributions is the same as the ones used for the Social Security contributions. The Minimum Contributions will be calculated using your gross earnings in that pay period and will include commission, bonuses, overtime payments and any other pay you receive in that period, for example, where tips are collected by your employer and shared out the value must be included in the gross earnings. If tips are received directly to you from the customer, they do not need to be included for Secondary Pension contributions.
- The contributions will be based on all your pay up to the Upper Earnings Limit for Social Security contributions. If you are earning below the Lower Earnings Limit for Social Security contributions you are not a Designated Employee. For more information on Social Security contributions, including limits, please click here.
When will the Secondary Pension contributions be deducted?
- The contributions should be deducted when you are enrolled into the pension scheme. If your employer has opted to defer your entry into the scheme, the contributions will start after the end of the defer period and will not be backdated to your first day of employment.
- Your employer will need to include the date the contributions commence on the Notice they give when you request to join the scheme. If they have decided to defer enrolling you into the scheme they need to let you know on the Notice when you will be enrolled. They have up to 1 month (or up to 3 months from the date you last opted out if this is later) from your request to join the scheme to enrol you into it.
When do the contributions get paid into my pension pot?
- Your employer will be given deadlines for paying the contributions into the pension pot by your Pension Provider. Once your employer has paid the contributions across there may be a delay in when they are shown in your record, your Pension Provider will need to allocate the payments and its unlikely it will happen automatically as they will have their own checks to do.
What happens to the contributions?
- Your employer and Pension Provider will agree between them what will happen to the pension contributions during the first 6 weeks of contributions. These contributions might not be invested straightaway as it will depend on the pension scheme they have set up.
- If your Contract of employment says your pension is compulsory, you won't be able to opt out. If the scheme isn't compulsory, you will be able to opt out of your pension whenever you wish, and if you become a Designated Employee your employer will be required to Automatically Enrol you in every 3 years.
- If you opt out in the first 6 weeks of being enrolled the contributions will be returned to your employer. When a pension pot is invested the value of it can go up and down, as you must both receive back exactly what was paid in, your Pension Provider is allowed to decide what happens to the contributions during those first 6 weeks. Your Pension Provider may request that your employer retains these funds for this 6 week period, at which point the Pension Provider will receive the funds from your employer and invest them. Alternatively, they may be happy to accept the contributions in line with their usual deadlines, if this happens, they can decide to invest these differently during that time instead of using their normal investment options. Your employer will be able to confirm what will happen to these contributions.
- If you ask to opt out after 6 weeks of being enrolled, all the contributions will remain invested in your pension pot.
What happens if I'm absent from work?
- If your Contract of Employment doesn't specify the pension scheme and contribution arrangements and you are paying Social Security contributions during your absence, Secondary Pension contributions will continue to be payable and any deductions on your pay will continue as if you were still at work.
- If you aren't receiving any pay, no deductions can be made. Your employer would be under no obligation to make contributions if this happens but if they have decided to maintain these contributions as part of your remuneration package you would need to speak with them to find out what is happening.
- You may decide to opt out of the pension during this period of unpaid absence, especially if it is likely to be for a long time, for example if you are taking an extended period of unpaid parental leave. If you opt out of the scheme there is no requirement for your employer to make any contributions during this period. As you are able to opt out at any time, this would be acceptable and you would be able to opt back in again when you return to work. Further information on opting out, and in, can be found here.
What do I need to do?
- Check your Contract of Employment to see if the pension scheme your employer has provided is part of your contract, if it isn't and your employer isn't using Your Island Pension (YIP) you will need to decide whether you want to go into your employer's pension scheme or if you want to use YIP. If you don't choose which scheme you want to join your employer will put you into their scheme.
- You will need to choose which scheme you wish to join; your employer must give you a Notice of Immediate Enrolment or Notice of Deferred Enrolment after you make a request to join the scheme. If they don't, they are in breach of the Law. The Notice gives you details of the deductions that will be made from your pay, details of YIP so you can compare them with your employer's pension scheme (if they are using a different scheme), and a section for you to decide which scheme you want to be put into. If you don't choose a scheme before the deadline date or fail to return the Notice to them, your employer will enrol you into their scheme and once you have been enrolled you won't be able to switch pension schemes.
- If you are given paperwork to complete you should do this promptly and return it as instructed. This is especially important for the Notice of Immediate Enrolment or Notice of Deferred Enrolment. If you do not understand the paperwork, you must tell your employer and Pension Provider immediately so they can help you. If you fail to return a Notice before the deadline your employer is required to enrol you into their pension scheme.
- If you do not make any choices about how your pension pot is invested, then your Pension Provider will invest the contributions automatically. If you want to find out what this means for your pension, you should contact your Pension Provider directly.
- Check your payslip to make sure that Secondary Pension contributions have been deducted, if they haven't, speak to your employer promptly to find out why.
