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Manage contributions

How do I calculate my contributions using certification?

You can choose to calculate contributions in a way that meets the requirements of one of three ‘sets’ or ‘tiers’ described in the legislation. Each of the three certification tiers or sets have different minimum contribution rates depending on the tier that you choose. This means instead of using the qualifying earnings band to calculate minimum contributions, you can decide if you want to include bonuses, overtime, performance-related pay and other earnings related to the worker’s employment with you. Using certification means using one of the three tiers available to meet your legal duties. At least every 18 months you need to create a certificate to say you’re doing this. This is known as ‘certification’.

If you choose certification to calculate contributions you’ll need to keep a copy of your certificate for six years after its expiry. You’ll also need to make it available to The Pensions Regulator or any of your workers on request.

Although current guidance talks about ‘sets’ of contribution levels, you’ll find that we refer to them as ‘tiers’ on our system. This is the term previously used by The Pensions Regulator in their guidance.

Tier 1

Tier 1 pensionable earnings must be equal to or more than the worker’s basic pay. This is a worker’s pay from the first pound. It generally excludes overtime, bonuses and commission. It’s only their basic salary.

Minimum contributions for the certification sets rise gradually, alongside the minimum contributions for qualifying earnings.

Date Minimum contributions
(as a percentage of worker
s pensionable earnings)
October 2012 to 5 April 2018 Minimum contribution: 3 per cent.
The employer must pay at least 2 per cent of this.
6 April 2018 to 5 April 2019 Minimum contribution: 6 per cent.
The employer must pay at least 3 per cent of this.
6 April 2019 onwards Minimum contribution: 9 per cent.
The employer must pay at least 4 per cent of this.

Tier 2

For tier 2, total pensionable earnings of all workers must be at least 85 per cent of their total earnings. Total earnings means everything paid to a worker including salary, commission, bonuses and overtime,performance related pay and any other earnings you have paid the jobholder. It also includes statutory sick, maternity, paternity and adoption pay. The pensionable earnings must be equal to or more than the worker’s basic pay.

Minimum contributions for the certification sets rise gradually, alongside the minimum contributions for qualifying earnings.

Date Minimum contributions
(as a percentage of worker’s pensionable earnings)
October 2012 to 5 April 2018
(Introductory rate)
Minimum contribution: 2 per cent.
The employer must pay at least 1 per cent of this.
6 April 2018 to 5 April 2019
(Introductory rate)
Minimum contribution: 5 per cent.
The employer must pay at least 2 per cent of this.
6th April to 2019 onwards
(Full rate)
Minimum contribution: 8 per cent.
The employer must pay at least 3 per cent of this.

Tier 3

Tier 3 includes all earnings in pensionable earnings, which means you need to include wages, commission, overtime, bonuses, performance-related pay and any other earnings you’ve paid the jobholder.

Minimum contributions for the certification sets rise gradually, alongside the minimum contributions for qualifying earnings.

Date Minimum contributions
(as a percentage of worker’s pensionable earnings)
October 2012 to 5 April 2018
(Introductory rate)
Minimum contribution: 2 per cent.
The employer must pay at least 1 per cent of this.
6 April 2018 to 5 April 2019
(Introductory rate)
Minimum contribution: 5 per cent.
The employer must pay at least 2 per cent of this.
6 April 2019 onwards
(Full rate)
Minimum contribution: 7 per cent.
The employer must pay at least 3 per cent of this.

You can find out more about certification sets on The Pensions regulator (TPR) website.

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