What is pension contribution matching?
Pension contribution matching is a workplace benefit where you, the employer, increase your pension contribution when an employee chooses to contribute above the minimum level.
Matching structures vary between employers. For example, some employers match contributions like for like, and others may offer tiered increases. Most will cap matching at a certain percentage rate. Your own scheme rules will outline the specific structure that applies.
Helping your employees understand what pension contribution matching is and how to use it can strengthen pension engagement and improve financial resilience in retirement. Communicating this effectively can ensure the investment you’re making into their pension is recognised and valued.
How it works
You choose how to set up your contribution structure and the rate your default contribution will start at. To help illustrate this, the example below begins with 4% from the employer and 4% from the employee, some of which is tax relief. It then shows how this might work for an employee earning £30,000 a year, with employer contribution matching available up to a capped level of 7% employer.
| Employer contribution | Employee contribution* | Total yearly contribution |
|---|---|---|
| 4% (£1,200) | 4% (£1,200) | £2,400 |
| 5% (£1,500) | 5% (£1,500) | £3,000 |
| 6% (£1,800) | 6% (£1,800) | £3,600 |
| 7% (£2,100) | 7% (£2,100) | £4,200 |
| 7% (£2,100) | 8% (£2,400) | £4,500 |
*This amount includes tax relief top up from the government. The actual amount deducted from your employees' monthly pay will be less than this.
In this example, if an employee chooses to contribute more than 7% to their pension, the employer contribution stays at the 7% capped level. Any additional contributions would come from the employee only. By gradually increasing their own contributions and making the most of employer pension contribution matching, employees can boost their pension savings over time, taking full advantage of this valuable workplace benefit.
The amount your employees get back at retirement depends on how much they pay in, the charges on their plan and how well the funds they invest in perform. Investment returns are never guaranteed so while the value of their investments could grow, it can also go down. This means employees could get back less than they put in.
The benefits for employers
By offering pension contribution matching you can:
- Increase recognition of a benefit you already provide: When employees don’t understand matching, the value of your investment can go unnoticed.
- Support recruitment and retention: Enhanced pension benefits are an important part of a competitive benefits package and help showcase your commitment to employees’ futures.
- Strengthen financial wellbeing across your workforce: Employees who engage with their pension earlier can feel more confident and prepared for the future.
- Encourage long-term engagement with your pension scheme: Connection to benefits drives sustained engagement with workplace communications and financial planning.
The benefits for employees
Pension contribution matching can help your employees:
- Boost their pension savings over time: Higher total contributions give their pension more potential for long-term investment growth. Although investment values can go down as well as up.
- Take advantage of additional contributions from you: Matching means you’re actively investing more in their future when they contribute more. It’s a tangible top up to their total reward package.
- Benefit from tax efficient saving: Pension contributions benefit from tax relief, which is then added to your employees pension savings. Tax treatment depends on individual circumstances and may change.
- Build positive savings habits: Knowing their employer supports their increased contributions can encourage more consistent, long-term saving behaviour.
Why strong engagement matters
Making sure employees are aware you offer pension contribution matching and that they understand the structure and how to request it, can help them benefit fully from it.
And avoid employees unknowingly missing out on additional contributions from you — funds that could significantly improve their long‑term retirement goals.
Help your employees make the most of contribution matching
Our research shows that just 37% of employees currently take advantage of pension contribution matching1 — but with the right support and communication, you can help close that gap.