Following our recent PensionBee article we had a couple of people ask how much should be added to their pensions every month.
I feel like the advice around this varies quite a lot - I’ve seen some people suggest you add 12%, others say 15%, and some people just say add the most you possibly can.
I’ve written a new article for the Emma blog that offers 2 other ways of working out if you’re saving enough for retirement.
Work out how much money you’ll actually need to maintain your current lifestyle
Use the rule that says you should take the age at which you first start paying into your pension and divide it by two.
Do you mean individually or including what your employer puts in?
For example I put in 5.45% of my salary and my employer puts in 27.1%.
Roughly on an average month I’d say I’d be collectively putting in about £1,100 or so.
Quite honestly pensions scare me! I have never fully understood them, and I by all accounts have 3 or 4 - one of which I completely have no idea how to access
Haha this was my first thought! 27% is an amazing employer contribution!
I think a lot of people feel like this! I think pension providers make the whole process so difficult/ugly/ boring because they know people won’t spend huge amounts of time learning about it
I have an account with PensionBee and I do think it helps make it all less scary - it’s just nice being able to see everything all together in a nice format and have some idea about how the money is being invested
I just sort of hope that come the future it’ll all just… work out, which I know is a terrible way to manage what could be 30+ years of funding my life.
As for where I work, it’s for the Met Police, though I couldn’t say which pension provider we use because again, I have no idea. I just have always had those contributions coming out each month
My previous place of work put in like 2-3% if I recall, so there is a big difference but I have previous to that worked in universities that were putting in 20% or so, so it has varied greatly over my life.
Your article says you get 25% tax relief from the government on contributions. For a basic rate taxpayer, this is 20% in the UK (and different in Scotland). Just in case you want to double check and update.
The article says that the government will top up your pension by 25%.
The tax relief for a standard rate taxpayer is 20% like you’ve mentioned, but this is the equivalent of a 25% top-up, as it compensates for the tax you paid ‘at the source.’
For example, you’d receive £200 for every £800 you paid in. £200 is 25% of £800 – so, you’ll have received a 25% top-up for every contribution you make.
I should have made this more clear in the article, so thanks for highlighting
I have shared all my pay rises with my pension. A bit for me and a bit for my pension. This approach has let me gradually increase my contributions without much impact. I am getting close to retirement and my contributions are 38%, including 18% employer contribution.
I do appreciate that the approach assumes a level of regular pay increases.
