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How SmartWork Calculates Your Private Pension (SIPP) Deductions

At SmartWork, we believe pension planning should be straightforward and stress-free. That’s why we have a user-friendly system to help you determine the right pension contribution amount for your financial goals.

Pension calculations can often seem complex because different payroll systems apply contribution percentages to various income components. To eliminate this confusion, we’ve streamlined our approach into two clear, flexible options that put you in control.

Option 1: Percentage of Contract Income 

With this method, your chosen percentage is applied directly to your total contract value, making calculations transparent and predictable.

How it works:

  • Select your preferred percentage, and we’ll apply it to your complete contract income
  • Example: Choose 10% on a £750 weekly contract, and we’ll deduct £75 for your pension
  • You’ll benefit from full tax relief, including Employment Cost savings
  • We process this as a Gross Employer Contribution to your pension provider
  • Your contribution automatically adjusts if you work additional or fewer days in any pay period

Key Considerations

  • 100% Contribution Selection: If you choose 100%, this applies to your available income above minimum wage requirements. We cannot contribute your entire contract income while ensuring you receive the mandatory minimum wage plus holiday pay for hours worked.
  • High Percentage Selections: Very high percentages may not always be achievable, depending on how much of your contract income is required for minimum wage plus holiday pay (typically around £482 weekly for 37.5 hours).
  • Minimum Wage Protection: If your selected percentage would reduce your pay below minimum wage requirements, we’ll automatically apply the highest possible percentage against your available income.

Option 2: Fixed Amount Per Pay Period 

Prefer consistency? This option maintains steady pension contributions regardless of income fluctuations.

How it works:

  • Set a fixed deduction amount that remains constant each pay period
  • Your contribution stays the same until you request a change
  • Independent of income variations, providing budget predictability

Important Note: If insufficient income is available in any pay period (due to fewer working days, for example), we’ll deduct the maximum allowable amount. Any shortfall won’t carry forward to subsequent periods.

Need More Information?

Our dedicated onboarding team is ready to help with personalised pension illustrations and answer any questions about varying contribution scenarios.