Mistake 03 · 2 October 2026 · Updated 28 October 2026
Opting out to feel a pay rise gives the employer's money back.
Auto-enrolment is dull on purpose. The mistake is treating the contribution line on a payslip as a tax you can decline without a cost. Part of that line is your employer paying into your pot, and part of your own share is tax relief.
For 2026/27 the Department for Work and Pensions has kept the automatic-enrolment thresholds where they were. If you are aged at least 22 and under State Pension age, you ordinarily work in the UK, and you earn more than £10,000 a year, your employer generally has to enrol you and pay into a workplace pension. You can opt out. Employers must not induce you to opt out. Every three years or so, eligible staff who opted out are put back in, and the decision has to be made again.
The 8 per cent that is not 8 per cent of your whole salary
On the qualifying-earnings basis, the statutory minimum is 8 per cent of a band of pay, not of every pound. For 2026/27 that band runs from £6,240 to £50,270. At least 3 per cent comes from the employer. The employee's share, including tax relief, makes up the rest, usually described as 5 per cent. Some schemes are more generous. Some meet the legal test on a different definition of pay, with different percentages, so a payslip will not always match the table below. If it does not, ask payroll which basis the scheme uses. Do not assume the blog table overrides a contract.
| Gross pay | Band used | Employer 3% | Employee share 5% | From net pay if relief at source |
|---|---|---|---|---|
| £20,000 | £13,760 | £412.80 | £688.00 | £550.40 |
| £28,000 | £21,760 | £652.80 | £1,088.00 | £870.40 |
| £35,000 | £28,760 | £862.80 | £1,438.00 | £1,150.40 |
| £40,000 | £33,760 | £1,012.80 | £1,688.00 | £1,350.40 |
| £52,000 | £44,030 | £1,320.90 | £2,201.50 | £1,761.20 |
| £64,000 | £44,030 | £1,320.90 | £2,201.50 | £1,761.20 |
Relief at source means the scheme claims basic-rate tax relief and adds it to the pot, so the amount leaving your net pay is less than the headline employee share. Scottish income tax rates on earned income are set separately, and the relief mechanics on a given scheme can differ from a simple 20 per cent picture if you are a higher-rate taxpayer. That is a question for the scheme booklet or an adviser, not a reason to opt out on a rumour.
Read a row as a year you do not get back easily. On £40,000 of gross pay, the band used in this illustration is £33,760. The employer piece is £1,012.80. The employee share is £1,688.00, of which about £1,350.40 would leave net pay under a plain relief-at-source assumption, with the rest claimed as relief. Opting out does not "save" £1,012.80. It declines it. Investment growth is uncertain and is not included here. The employer contribution is not uncertain: it is in the scheme rules, or it is not.
Salary sacrifice is a different conversation
Some employers let you exchange salary for a pension contribution. That can reduce National Insurance as well as income tax, and it can affect pay used for mortgage applications, statutory pay, and student-loan calculations. It also cannot take pay below the relevant minimum wage. Asking HR for the worked example on your own salary is reasonable. Opting out entirely because sacrifice sounds complicated is the mistake this page is about.
This is not the State Pension
A workplace pot is not the State Pension. Opting out of the workplace scheme does not opt you out of National Insurance, and paying National Insurance is what builds State Pension qualifying years. Mixing those two systems is how people frighten themselves out of the employer contribution while still paying NI. Check your State Pension forecast on GOV.UK if you want the other map. It is free.
Annual allowance, briefly
The standard annual allowance for pension inputs in 2026/27 is £60,000. It tapers for people with high incomes: threshold income over £200,000 and adjusted income over £260,000 can reduce the allowance, down to a £10,000 minimum on the published taper. Most readers of a household blog are nowhere near that taper. The relevant mistake for them is still the opt-out, not the taper. If you are near it, you need a tax adviser or an FCA-authorised planner, because the definitions of threshold income and adjusted income are technical.
These notes are general information for readers in the United Kingdom. They are not a personal recommendation, not a forecast, and not an instruction to buy, sell, borrow, or opt out of anything. Operandultra is not authorised by the Financial Conduct Authority. Figures below are written for the 2026/27 tax year unless a later commencement date is stated. Confirm them on GOV.UK, with MoneyHelper, or with an FCA-authorised adviser before you act.