Pension Clause in UK Contracts: What It Means & Example Wording

When to Include a Pension Clause

• In every employment contract — it is a legal requirement to provide pension information in the written statement of employment particulars
• When offering enhanced pension contributions above the statutory minimum as part of the benefits package
• In contracts for directors and senior employees who may have separate pension arrangements

Example Wording

This example wording is illustrative only. Customise it to your specific circumstances and consider seeking legal advice.

Is a Pension Clause Enforceable in the UK?

Pension auto-enrolment is a legal requirement under the Pensions Act 2008, enforced by The Pensions Regulator (TPR). Employers who fail to comply face fixed penalty notices and escalating daily penalties. The statutory minimum contribution (as of April 2019) is 8% of qualifying earnings, with at least 3% from the employer. Employers can offer more generous arrangements. Contractual pension clauses are enforceable, and the employer cannot reduce its pension contribution below the statutory minimum. The Pensions Regulator can bring criminal prosecutions for serious non-compliance.

Common Mistakes

• Failing to auto-enrol eligible workers — this is a criminal offence that can result in significant penalties from The Pensions Regulator
• Not re-enrolling workers who previously opted out — employers must re-enrol approximately every three years
• Describing pension contributions as a percentage of basic salary when the statutory requirement is based on 'qualifying earnings' (a band of earnings between the lower and upper earnings limits) — using the wrong reference point may result in under-contribution