Qualifying earnings is a band of earnings used to calculate pension contributions used by most employers.
Under qualifying earnings, contributions are calculated based on a part of your earnings. In the tax year 2022/23, the lower annual earnings threshold is £6,240 and the upper threshold is £50,270 (these are £520 and £4,189 monthly). That means that the first £6,240 isn’t included, so qualifying earnings can’t be more than £44,030 (£50,270 minus £6,240).
Let's look at Jon as an example:
- Jon earns £5,000 a month and contributes 5% into his pension and his employer contributes 3%
- His monthly qualifying earnings would be £3,669.00 (£4,189 - £520)
- Therefore, his pension contributions will be calculated as 5% of £3,669 and his employer contributions will be calculated as 3% of £3,669
You can find more details on how your pension contributions are calculated by logging into the Husky for Everyone app.
