A glossary of pension related terminology you’ll see in Sage Payroll.
In Sage Payroll, you’ll see terms used by:
- HMRC
- The Pension regulator
- Pension provider
Here we give an explanation of some of the common one used to help you understand and process your pensions.
▼Auto enrolment
This is the process of enrolling eligible jobholders into a qualifying workplace pension.
▼Contributions
This is what both the employee and employer will pay into the employee’s pension pot. This could be a fixed amount or a percentage.
▼Defined benefit (DB) scheme
A type of pension scheme related to the members’ earnings when they leave the scheme. Often called a final salary scheme.
▼Defined contribution (DC) scheme
A type of pension scheme paid into by employees and employers. Usually, they invest the contributions.
▼Earnings trigger
The level of earnings from which a worker needs enrolling.
▼Eligible jobholders
Enrol these employees into your default qualifying pension scheme. Make employer contributions towards it.
Eligible jobholders:
- Aged between 22 – state pension age (SPA)
- Earn above the automatic enrolment earnings trigger
- Working in the UK
NOTE: If the employee turns 22 mid-tax month, you can wait until the next tax month to enrol them. This avoids partial contributions.
▼Eligible postponement
Employers can choose to postpone assessment for automatic enrolment. This is for any period of up to three months.
▼Entitled workers
Entitled workers are:
- Aged between 16 and 74
- Earn less than the lower earnings limit (LEL) for NI
- Working in the UK
An entitled worker can join a pension scheme if they want to. It doesn’t have to be a qualifying scheme and you don’t have to make any employer contributions.
These employees can choose to join a pension scheme. The scheme doesn’t have to be one you use for automatic enrolment. You only pay employer pension contributions if you want to.
▼Final salary scheme
A type of pension scheme related to the members’ earnings when they leave the scheme. Also known as a Defined benefit (DB) scheme.
▼Hybrid scheme
A pension scheme that includes a combination of DB and DC benefits.
▼Inducement
An offer made by an employer encourages a member to transfer out of an existing pension scheme. Or to opt out of their automatic enrolment scheme. This is usually an upfront cash payment. It could be a one-off contribution to an alternative, usually DC, pension arrangement.
▼NEST
The National Employment Savings Trust is a pension provider, available to all employers. They offer a pension scheme designed for automatic enrolment. Any UK employer can use it to meet their new workplace pension duties. Suitable for all sizes of organisation.
▼Net Pay Arrangement
Employees receive tax relief by taking the contribution on the gross amount of pay (For example, at 1%).
▼Non-eligible jobholder
A non-eligible jobholder is either:
- Aged between 16 and 74
- Earns more than the lower earnings limit (LEL) for NI but not more than the automatic enrolment earnings trigger
- Working in the UK
Or
- Aged between 16 and 21 or state pension age (SPA) and 74
- Earns more than the automatic enrolment earnings trigger
- Working in the UK
A non-eligible jobholder can opt in to a pension scheme. It must be a qualifying scheme and you must make employer contributions.
▼Occupational pension scheme
A pension scheme set up by an employer for their workers.
▼Opt in or join
Some non-eligible jobholders have a right to opt in to a qualifying pension scheme. Entitled workers also have a right to join a pension scheme. Neither have to qualify for automatic enrolment.
▼Opt out or leave
An employee enrolled due to automatic enrolment has the right to opt-out of the scheme. They must first receive the relevant information from their employer. If they don’t opt out within certain time scales, they can choose to leave the scheme.
▼Pay reference period
The pay reference period aligns with the tax periods. For a monthly paid employee, the pay reference period starts on the first day of the tax month. This is always the sixth day of a calendar month.
▼Pensionable pay
Any employee pay that’s subject to pension deductions. To check the payments subject to pension deductions, go to Settings. Select Payment & Deductions and select the relevant payment type.
▼Phasing
The lowest pension contribution increases planned by law.
▼Postponement
Employers can postpone their staging date under certain circumstances. Postponement allows employers to avoid pro-rated calculations. It also helps with refunding contributions. For example, when people opt out in a different tax year to the one in which the deduction happened.
▼Qualifying earnings
Qualifying earnings is a reference to earnings between a lower and upper level. Qualifying earnings consist of any of the following components of pay paid to the worker.
- Salary
- Wages
- Commission
- Bonuses
- Overtime
- Statutory sick pay
- Statutory maternity pay
- Ordinary or additional statutory paternity pay
- Statutory adoption pay
It’s the employers' responsibility to understand TPR guidelines for qualifying earnings. You need to determine what the qualifying earnings are for your employees. We can’t tell you what earnings to use. If you’re unsure, contact TPR or your pension provider.
▼Qualifying pension scheme
A pension scheme that meets the criteria for automatic enrolment, as set out by TPR. For more information, visit their website at thepensionsregulator.gov.
▼Relief at Source
This pension means the employee pays less, For example, 0.8% instead of 1%. The government pays the remaining amount into the employees pension pot. For example, 0.2%.
▼Salary Sacrifice
A salary sacrifice pension scheme deducts pension contributions from the employee's gross pay. This happens before the calculation of PAYE and National Insurance.
▼Staging date
This is the date from which employers must assess employees for automatic enrolment.
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- Last Modified Date
- Tue Jan 20 14:00:43 UTC 2026
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