For context:

  • My annual gross salary is £55,000, which makes it around £4583.33 gross per month (£55,000 / 12 = £4583.33).
  • I have been auto-enrolled onto my workplace's pension scheme and my contribution is 5%.
  • My workplace contributes the other 3%

My workplace uses NEST for processing pension contributions.

When I checked, it mentioned that NEST uses 'relief at source', meaning my contributions are calculated based on my net pay but I don't seem to see any evidence of this. Perhaps I am getting confused at how this is calculated. My net salary after tax & student loans is (excluding pension stated on payslip): £3205.86

I recently double checked my payslip from work and noticed that they have my pension contribution as £146.76.
But when I use the pension regulator website's calculator, for the annual salary of £55,000, I can see that the amount I should pay is: £183.46.

This happens to be that £183.46 - 20% = £146.76. So is my contribution correct? Or should I be paying £183.46 in total like the calculator suggests?

I know for sure that there are no other fees involved when my pension contribution is sent to NEST so I'm not sure which value should be correct?

The only way I can make sense of this is if I use the following calculation

Tax year of 22-23:

Gross Salary: £4583.33
Qualifying Earnings: £4583.33

Qualifying Earnings Lower Threshold (monthly 2022/2023): £520
Qualifying Earnings Upper Threshold (monthly 2022/2023): £4,189

Taken from: https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/declare-your-compliance/ongoing-duties-for-employers-/earnings-thresholds

Earnings on which pension is calculated:
£4,189 (Earning over Qualifying Earnings Upper Threshold ignored) - £520.00 = £3,669.00

Therefore my pension contribution is calculated as:
£3,669.00 * 5% = £183.45

Applying basic tax relief, that comes to:
£183.45 - 20% = £146.76
Which is what it states on my payslip.

Also, compared with the values from the pensions regulator website: https://www.thepensionsregulator.gov.uk/employers/work-out-your-automatic-enrolment-costs

This works out the same (being £183.45).

But I thought I should be contributing £183.45 into my pension, not £146.76, because as far as I understand, 20% of £183.45 is more than 20% of £146.76. Or is that the incorrect assumption to make here? I don't fully understand how this 'relief at source' works, if it says it works on my net pay.

The way I understand it, I pay £146.76 and NEST adds 20%. But £146.76 + 20% is not £183.45.

1 Answer 1


"Relief at source" means that the pension provider claims basic rate tax back from HMRC on your contributions. If the final contribution should be £100, then £80 - i.e. £100 with basic rate tax removed - is deducted from your net pay. The other £20 comes from HMRC.

When you do the calculation the other way around, the "top up" from the deducted amount is 25% simply because of the arithmetic of percentages.

So if the final contribution is supposed to be £183.45 then the deduction of £146.76 sounds correct. It sometimes takes a little while for the top up to be claimed, so you could give it a couple of months then check that the full amount has indeed made it to your NEST account.

With earnings of £55K you are presumably paying higher rate tax and are entitled to additional tax relief on your pension contributionss You should make sure you contact HMRC about this after the end of the tax year if they don't contact you first.

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