Opting out of a workplace pension: what you gain and lose
Updated 12 November 2026 · Tax year 2026/27
Scope: automatic enrolment into a defined contribution workplace pension at the legal minimum, 2026/27. Your scheme may pay more; check its rules.
If your employer has automatically enrolled you into a workplace pension, you will see a pension deduction on your payslip and a smaller take-home than the headline salary suggests. Opting out stops that deduction, so your pay goes up straight away. It also stops your employer's contribution and the tax relief that goes with yours, so you give up more than you gain.
This guide works through the numbers for 2026/27 using the js/tax.js engine behind the Take-Home Lab calculator, for England, Wales and Northern Ireland. It is not financial advice: whether to save into a pension is a personal decision, and MoneyHelper offers free, impartial guidance.
The 2026/27 auto-enrolment rules
The Department for Work and Pensions reviewed the thresholds for 2026/27 and kept them at their 2025/26 levels:
| Threshold | Year | Month | Week |
|---|---|---|---|
| Earnings trigger for automatic enrolment | £10,000 | £833 | £192 |
| Lower level of qualifying earnings | £6,240 | £520 | £120 |
| Upper level of qualifying earnings | £50,270 | £4,189 | £967 |
Scroll sideways to see the whole table →
If you are aged 22 to State Pension age, usually work in the UK and earn at least £10,000 a year, your employer must enrol you (GOV.UK: joining a workplace pension). Minimum contributions are worked out on qualifying earnings: the part of your pay between £6,240 and £50,270. The legal minimum is 8% of that band in total, with at least 3% from your employer. You normally pay the other 5%, and that 5% includes tax relief.
Many employers work out contributions on your whole salary or pay more than the minimum. The examples below use the legal minimum on qualifying earnings, so a more generous scheme makes opting out even more expensive.
Worked example: £30,000, net pay arrangement
Assumptions: 2026/27 · England, Wales or Northern Ireland · standard £12,570 allowance · no student loan · minimum contributions on qualifying earnings · net pay arrangement.
- Qualifying earnings: £30,000 − £6,240 = £23,760.00
- Your 5%: £1,188.00 a year (£99.00 a month)
- Employer's 3%: £712.80 a year (£59.40 a month)
- Total into the pension: £1,900.80
- Take-home in the scheme: £24,169.20; opted out: £25,119.60
- Cost to your take-home of staying in: £950.40 a year (£79.20 a month)
Your £1,188 contribution only costs you £950.40 because it is taken before income tax, which saves 20% × £1,188 = £237.60. National Insurance is still charged on it. So staying in costs £950.40 of take-home and puts £1,900.80 into your pot: every £1 you give up buys £2 of pension. Opting out swaps that £1,900.80 for £950.40 of extra pay.
Net pay versus relief at source
There are two ways a scheme gives you tax relief, and you cannot choose which one your employer uses.
- Net pay arrangement: your contribution comes out of your pay before income tax. Relief is automatic at your highest rate. The calculator's "Net pay" option models this.
- Relief at source: your contribution comes out of pay after tax, and the pension provider claims 20% basic-rate relief from HMRC and adds it to your pot. You pay £80 for every £100 that goes in. On £30,000, you pay £950.40 and the provider adds £237.60: the same result as above.
The two methods give different answers at the edges. If you earn less than the personal allowance and pay no income tax, a net pay scheme gives no tax relief, but relief at source still adds 20%. Higher-rate taxpayers in a relief at source scheme get the first 20% automatically and must claim the rest through their tax code or a Self Assessment return.
Worked examples at other salaries
| Salary | Your 5% | Employer 3% | Into pension | Cost to take-home |
|---|---|---|---|---|
| £12,000 | £288.00 | £172.80 | £460.80 | £288.00 (net pay) or £230.40 (relief at source) |
| £22,000 | £788.00 | £472.80 | £1,260.80 | £630.40 |
| £30,000 | £1,188.00 | £712.80 | £1,900.80 | £950.40 |
| £50,000 | £2,188.00 | £1,312.80 | £3,500.80 | £1,750.40 |
| £60,000 | £2,201.50 | £1,320.90 | £3,522.40 | £1,320.90 |
Scroll sideways to see the whole table →
At £12,000 you are above the £10,000 trigger, so you are enrolled, but your pay is below the £12,570 personal allowance and you pay no income tax. In a net pay scheme your £288 costs the full £288. In a relief at source scheme it costs £230.40.
At £60,000 qualifying earnings stop at £50,270, so the minimum contributions barely rise. Your £2,201.50 is relieved at 40%, so it costs only £1,320.90 in a net pay scheme. In a relief at source scheme you would pay £1,761.20 from take-home and claim the extra £440.30 back.
What you give up by opting out
- The employer contribution. On £30,000 that is £712.80 a year your employer will not pay you in cash instead. Employers do not have to make up the difference.
- The tax relief. £237.60 a year on £30,000 at basic rate, more for higher-rate taxpayers.
- Growth. Money in a pension is normally invested until you can take it. This site does not project investment returns.
You also give up access: money in a pension usually cannot be taken until the minimum pension age. That trade-off, between cash now and a larger pot later, is the real decision.
How opting out works
- Who you tell: you opt out through the pension provider, not your employer. Your employer must tell you how.
- The one-month window: if you opt out within a month of being enrolled, you get back what you have already paid in. After that, contributions usually stay in the pension until you retire.
- Re-enrolment: your employer must re-enrol you every 3 years, or sooner if they choose, and will write to you when they do.
- Opting back in: you can ask to rejoin at any time by writing to your employer. They do not have to take you back if you opted in and out in the past 12 months.
Some schemes let you reduce your contributions for a time instead of stopping them. Ask your employer and provider whether that is possible.
What the calculator shows
The calculator's pension input is a percentage of your whole salary, not of qualifying earnings. To match a minimum auto-enrolment deduction, divide your 5% of qualifying earnings by your salary: on £30,000, £1,188 is 3.96% of gross. Choose "Net pay" or "Salary sacrifice" to match your payslip. A salary sacrifice pension also saves NI, so the same £1,188 would cost only £855.36 of take-home. See salary sacrifice versus net pay.
Frequently asked questions
How much more take-home will I get if I opt out?
On £30,000 at the legal minimum, £950.40 a year or £79.20 a month in a net pay scheme. Your 5% of qualifying earnings is £1,188, but tax relief means it only costs you £950.40.
What are the auto-enrolment thresholds for 2026/27?
The earnings trigger is £10,000 a year. Minimum contributions are worked out on qualifying earnings between £6,240 and £50,270. The DWP kept all three at their 2025/26 levels.
Will I get my money back if I opt out?
If you opt out within a month of being enrolled, you get back what you have paid in. After that, contributions usually stay in the pension until you retire.
Does my employer have to pay me their contribution instead?
No. If you opt out, your employer stops paying in and does not have to add the money to your salary.
Will I be put back into the pension?
Yes, usually. Employers must re-enrol eligible staff every 3 years. You can also ask to opt back in at any time.
Model your pension in the calculator
Sources (checked 12 November 2026): DWP review of the automatic enrolment earnings trigger and qualifying earnings band for 2026/27; The Pensions Regulator earnings thresholds; GOV.UK what you, your employer and the government pay; GOV.UK if you want to leave your workplace pension scheme; GOV.UK pension tax relief. Figures from the Take-Home Lab calculator engine for 2026/27. Illustrative only — not financial advice. Rodway Labs · hello@takehomelab.co.uk.