Pensionable Earnings 

What it means for your clients - and why it matters 

Pensionable earnings are the part of an employee’s pay that’s used to calculate both the employer and employee contributions. For advisers, understanding this is key to helping client companies stay compliant and manage costs.

What counts as pensionable earnings depends on the setup of the scheme. Here’s how it works. 

What’s usually included? 

It’s not just base pay. Depending on the scheme rules set by your client companies, pensionable earnings might include: 

• Salary or wages 

• Overtime 

• Bonuses and commission 

• Statutory pay (like sick pay or parental leave) 

However, things like travel expenses or one-off reimbursements aren’t usually included 

How pensionable earnings are worked out 

The employer chooses the method when the scheme is set up. As an adviser, it’s important to know how each option affects contributions, payroll, and compliance.

Unbanded earnings (gross qualifying earnings)

You base contributions on full pay, before any deductions. 

Example: 
If someone earns £2,300 in salary and £200 in overtime, their pensionable earnings are £2,500.

Banded earnings

You only count earnings between a lower and upper threshold. For 2024–25, that’s: 

• Lower: £6,240 

• Upper: £50,270 

Example: 
Someone earning £2,100 a month would have £1,580 counted as pensionable (after applying the annualised lower threshold). 

Other certified methods 

Some schemes use one of these self-certified approaches instead. They still meet minimum requirements but offer flexibility in how you calculate contributions.

Basic pay only

Only the core salary is used. No bonuses or extras.

At least 85% of total pay

You set pensionable earnings at 85% or more of total pay.

Total pay

Everything counts – salary, bonuses, overtime, commission. 

These methods give you room to align pension setup with payroll structure and cost planning. 

Why it matters 

The way you define pensionable earnings affects both employer and employee contributions. It has a real impact on employee savings and on payroll planning. 

It’s important to guide clients through the options - the right choice depends on their workforce, payroll setup, and approach to employee support.

Need a hand? 

We’re here to make pension setup simple – and make sure each client’s scheme supports their business goals and their employees.

• Call us on 01452 922000
• Email help@mythrive.co.uk
• Or start a live chat on our website or on the Adviser Portal