What Is Pensionable Pay

What Is Pensionable Pay?

Pensionable pay refers to the portion of your earnings that counts towards your pension contributions — both from you and your employer. It’s a key part of how workplace pensions are calculated and determines how much is paid into your pension pot each month.

But not all of your earnings may be counted as pensionable. This can depend on the type of pension scheme, your employment contract, and the rules set by your employer or pension provider.

Understanding what counts as pensionable pay helps you make sense of your payslip deductions and ensure you're getting the right level of contributions toward your future retirement.

Why does pensionable pay matter?

Your pensionable pay affects:

• How much you and your employer contribute to your workplace pension

• The size of your pension pot over time (if you have a defined contribution scheme)

• The value of your future income in retirement (if you have a defined benefit/final salary scheme)

• Whether you’re meeting minimum contribution requirements under auto-enrolment

Put simply: the higher your pensionable pay, the more you’re likely to build up for retirement — and the more your employer has to contribute.

What counts as pensionable pay?

There is no single definition of pensionable pay — it depends on the rules of your specific pension scheme. However, it typically falls into one of the following categories:

1. Basic salary only

Some schemes only count your annual base salary, excluding bonuses, overtime, or allowances.

2. Qualifying earnings (auto-enrolment schemes)

This is the most common approach under automatic enrolment. For the 2024/25 tax year, qualifying earnings are your earnings between:

• £6,240 and £50,270 per year (or £520 and £4,189 per month)

This includes:

• Salary

• Bonuses

• Overtime

• Statutory sick pay

• Maternity, paternity or adoption pay

Contributions are only made on the portion of your pay within these thresholds — not on your total pay.

3. Total earnings

Some employers calculate pension contributions based on your entire gross pay — including overtime, commission, bonuses, and allowances. This is more generous and helps grow your pension pot more quickly.

Always check your employment contract or scheme documents to see which definition your employer uses.

Pensionable pay and different pension types

Defined Contribution (DC) schemes

• Contributions are based on your pensionable pay and go into your personal pension pot

• You can often choose to pay more than the minimum — and some employers match extra contributions

• The more of your earnings that are classed as pensionable, the more is invested for your future

Defined Benefit (DB) or Final Salary schemes

• Pensionable pay is used to calculate your future retirement income

• This is typically based on:

• Your final salary, or

• Your career average earnings (CARE)

• Only income defined as pensionable counts towards these calculations

Is overtime or bonuses pensionable?

It depends on your scheme:

• In basic salary schemes, overtime and bonuses are not pensionable

• In qualifying earnings schemes, they are included

• In total earnings schemes, they definitely are included

Ask your HR or payroll department for clarification if you’re unsure.

Can I increase my pensionable pay?

You can’t usually change what is defined as pensionable pay, but you can increase your pension contributions in other ways:

• Salary sacrifice: Agree to reduce your salary and redirect the savings to your pension (with possible tax and NI savings)

• Additional voluntary contributions (AVCs): Pay more into your pension pot above the standard rate

• Opt into pensionable bonuses: In some schemes, you may be able to request that certain income is made pensionable

It’s worth checking whether your employer offers matching contributions if you increase your own payments.

Where to check your pensionable pay

To find out your pensionable pay:

• Look at your payslip — there may be a specific pensionable pay figure listed

• Ask your HR or payroll team

• Log in to your pension provider’s online portal to see contributions and salary used

• Check your employment contract or staff handbook for pension scheme terms

Final thoughts

Pensionable pay is the foundation on which your retirement savings are built. Whether you're in a defined contribution scheme saving into a pot, or a defined benefit scheme based on salary history, understanding what counts as pensionable pay helps you make better decisions about your contributions — and your future.

If you're unsure about how your pensionable pay is calculated, it’s worth asking your employer or speaking to a financial adviser. A small clarification today could mean a much more secure retirement later on.