What is pension employee contribution

It’s your savings for pension. These days companies enrol you automatically when you join - start work. You can opt out anytime if you do not wish to be part of this scheme. See Human Resources and asked them for the form to opt out or speak to your manager.

Hi guys does anyone know what pension employee contribution is I found this on my payslip as a deduction although I don’t know what it is and it has been wrongly deducted.

Employers are required by law to automatically enroll employees who meet certain requirements into a pension scheme. It sounds like this has happened to you.

Now, you can choose to be unenrolled and that will cause these deductions to stop. The question is -- does it make sense to stop paying into a pension? Sainsbury's will happily unenroll you -- effectively you're saying that you want to have your pay (well, 'remuneration' might be a better word than 'pay' in this context).

A pension is a means of saving for retirement. The pension contribution that is being taken from your pay is passed over to a pension company for them to invest on your behalf. When you come to retire many years into the future you can then decide what you want to do with that pension pot. (If you work for different employers you may end of with a set of pension pots.) Historically, most people converted that pension pot into an "annuity", which would (essentially) pay out a monthly pension for the rest of their life. (There's a lot more flexibility these days.)

You'll note that what's on your pay slip is "pension employee contribution". Along with that, your employer also pays money into the pension -- but that probably doesn't appear on your pay slip. If you unenroll from the pension then the employee contribution will no longer be taken, so you'll see a small increase in take-home pay. But the employer contribution doesn't get paid to you, it's purely a saving for the employer. It's free money that was going into your pension, but isn't any more -- it's a cost that the employer no longer has to bear.

The other thing with the employee contribution is that it's deducted from your wages before income tax is calculated. That means that every £1.00 that goes into your pension pot only reduces your take-home pay by 80p. (To put it the other way round, every £1.00 reduction in take-home pay is £1.25 that goes into your pension.)

One other benefit typically included in a pension is "death-in-service" benefit. This pays out (as the name suggests) if you die while in employment and contributing to the pension scheme. Obviously this is only relevant if you have dependents (e.g. partner, child).

So, should you stay in or opt out? I'd say that if the cost of staying in doesn't cause you financial problems (or exacerbate existing financial problems) then I would definitely stay in. By opting out, you're saving some money today, but at the cost of losing money over the long term and missing out on contributions from your employer and the tax man.

Sorry for wanting more clarity but pension is what exactly I’ve been within my company for 1 year now but have given service to them for 3 years across 2 different spells. Where could I find this form for a Sainsbury’s worker please.