Alternative contribution bases allow different ways to calculate pension contributions.
What Are Alternative Bases?
Definition
Feature Detail Alternative to Qualifying earnings Three tiers Different options Self-certify Employer confirms Different rates May apply
Why Use Alternatives
Reason Benefit Simplicity First pound contributions Existing scheme Match current basis Workforce fit Better for some Payroll ease Simpler calculation
The Three Tiers
Overview
Tier Basis Minimum Total 1 Basic pay 9% (with 4% employer) 2 Total pay 8% (with 3% employer) 3 Pensionable pay 8% (with 3% employer)
Tier 1 - Basic Pay
Requirement Detail On basic pay Not including extras At least 85% Of workers Above lower threshold £6,240 9% total 4% employer minimum
Tier 2 - Total Pay
Requirement Detail On total pay All earnings No lower threshold From first pound 8% total 3% employer minimum
Tier 3 - Pensionable Pay
Requirement Detail Scheme definition Of pensionable pay Above lower threshold £6,240 8% total 3% employer minimum
Tier 1 - Basic Pay Detail
What Counts
Include Detail Basic salary Core pay Basic wages Standard rate Not overtime Excluded Not bonuses Excluded Not commission Excluded
Requirements
Must Meet Criteria 85% of workers Basic pay above £6,240 Contributions On basic pay Minimum 9% total, 4% employer
When to Use
Suitable If Situation Simple pay structure Basic + extras Want higher employer Contribution 85% over threshold On basic
Tier 2 - Total Pay Detail
What Counts
Include Detail Everything All pay Salary Yes Bonus Yes Overtime Yes Commission Yes
Requirements
Must Meet Criteria From first pound No lower threshold Total pay All earnings Minimum 8% total, 3% employer
When to Use
Suitable If Situation Simpler calculation No banding Variable pay Lots of extras Want fairness All pay pensioned
Advantage
Benefit Detail No threshold To track From £1 All pensioned Simpler payroll Less calculation
Tier 3 - Pensionable Pay Detail
What Counts
Include Detail Scheme definition What scheme says May vary By scheme Above threshold £6,240
Requirements
Must Meet Criteria Above lower threshold £6,240 Scheme-defined pay As pensionable Minimum 8% total, 3% employer
When to Use
Suitable If Situation Existing scheme With definition Want consistency With current practice Scheme rules Already set
Certification
What's Required
Action Detail Annual certificate Complete Confirm compliance Meet requirements Keep records Evidence Review Each year
Certificate Content
Confirm Detail Which tier Using Requirements met For that tier Period covered Scheme year Employer signature Or equivalent
Timing
When Certify Start of scheme year For coming year Or scheme changes When basis changes Retain For records
Choosing a Tier
Decision Factors
Consider Factor Pay structure What suits Admin ease Simpler? Current scheme Alignment Contribution level What works
Comparison
Factor Qualifying Tier 1 Tier 2 Tier 3 Basis Band Basic Total Scheme Threshold Yes Yes No Yes Total min 8% 9% 8% 8% Employer min 3% 4% 3% 3%
Examples
Using Qualifying Earnings
| Salary | £30,000 |
| Qualifying | £23,760 |
| Employer (3%) | £712.80 |
| Employee (5%) | £1,188.00 |
| Total | £1,900.80 |
Using Tier 2 (Total Pay)
| Salary | £30,000 |
| Qualifying | £30,000 (all) |
| Employer (3%) | £900.00 |
| Employee (5%) | £1,500.00 |
| Total | £2,400.00 |
Difference
Method Total Contribution Qualifying £1,900.80 Tier 2 £2,400.00 More in pot £499.20/year
Switching Methods
Can Change
When Position New scheme year Can switch Need to certify New method Transition May need care
If Can't Certify
If Unable Action Don't meet criteria Can't use tier Switch method To different Or qualifying earnings Default
Record Keeping
What to Keep
Record Purpose Certificates Compliance Calculations Evidence Pay records Proof of basis Decision rationale Why chosen
How Long
Duration Period 6 years Minimum Evidence Of compliance
Summary
Key Options
Method Basis Total Min Qualifying earnings Band 8% Tier 1 Basic pay 9% Tier 2 Total pay 8% Tier 3 Pensionable 8%
Requirements
Must Do Certify Annually Meet criteria For tier Keep records Evidence Review Each year
Frequently Asked Questions
What are alternative contribution bases? Instead of using qualifying earnings (£6,240-£50,270 band), employers can use alternative bases: basic pay at least 85% of workers, total pay, or scheme-defined pensionable pay. Different minimum contribution rates apply.
Why use an alternative contribution basis? Alternative bases can simplify payroll (using total pay from first pound), align with existing pension schemes, or better suit your workforce. Some employers find it easier than tracking qualifying earnings bands.
How do I certify using an alternative basis? Complete an annual certificate confirming you meet the requirements for your chosen tier. Keep records showing compliance. Re-certify each scheme year and be prepared to switch methods if you can't comply. Disclaimer: This information is for general guidance only and does not constitute legal advice. Employment law is complex and changes frequently. For specific situations, consult ACAS, a qualified employment lawyer, or HR professional.