Pension basics · Guide

How much should I pay into my pension?

There is no single correct answer, but there are useful benchmarks — the statutory minimum, a widely-used rule of thumb, and the maths for catching up if starting late.

By Pension Bible editorial team·Last reviewed 9 April 2026·4 min read

The minimum (auto-enrolment at 8%)

Since 2019, the auto-enrolment minimum has been 8% of qualifying earnings, split between employee (5%) and employer (3%). Qualifying earnings for 2025/26 are the band between £6,240 and £50,270 — so the contributions are calculated on a narrower base than total salary.

For someone earning £30,000:

• Qualifying earnings: £30,000 - £6,240 = £23,760
• Total minimum contribution: 8% x £23,760 = £1,900.80 per year
• Of which employee pays: £1,188 (5%)
• Of which employer pays: £712.80 (3%)

This is a floor, not a target. The Pensions and Lifetime Savings Association (PLSA) estimates that a "moderate" retirement lifestyle requires an income of roughly £23,300 per year (single person, 2024 figures). Achieving that from a defined contribution pension alone — on top of the state pension — typically requires total contributions well above the 8% minimum.

The retirement need calculator estimates the pot size needed for different income targets.

The rule of thumb: half your age as a %

The most commonly cited heuristic is to take the age at which pension saving begins and halve it. That number becomes the total percentage of pre-tax salary (employee plus employer) to contribute throughout working life.

• Start at 20: contribute 10%
• Start at 25: contribute 12.5%
• Start at 30: contribute 15%
• Start at 35: contribute 17.5%
• Start at 40: contribute 20%

This rule is attributed to various sources and has no rigorous mathematical derivation. It is a rough approximation that assumes retirement at 67–68, a pension invested in equities, and a target retirement income of roughly half to two-thirds of working salary.

Its main virtue is simplicity. Its main weakness is that it does not account for existing pots, state pension entitlement, or other assets. But as a starting point for someone who has no idea what to contribute, it is more useful than the 8% minimum.

Starting late: the catch-up arithmetic

The penalty for starting late is not linear — it is exponential, because the late starter misses the most powerful years of compound growth.

Consider two scenarios, both assuming 5% annual growth and retirement at 67:

Person A: Starts at 25, contributes £300/month for 42 years

• Total contributions: £151,200
• Pot at 67: approximately £520,000

Person B: Starts at 40, contributes £600/month for 27 years

• Total contributions: £194,400
• Pot at 67: approximately £390,000

Person B contributes 29% more in total cash, but ends up with 25% less. The missing 15 years of growth cannot be replaced by doubling the contribution. The pension growth calculator models this for any starting age and contribution level.

This does not mean starting late is futile — it means the required savings rate is higher, and expectations may need adjusting. A 45-year-old starting from zero faces a steeper path than a 25-year-old, but even late contributions benefit from tax relief and employer matching.

The employer match: free money first

Before optimising contribution rates, the first question is whether the employer offers matching above the 3% minimum. Many employers match contributions up to 5%, 6%, or even higher.

An employer match is an immediate 100% return on the employee's contribution — before any investment growth. No other pension decision delivers a comparable guaranteed return.

The optimal sequence:

1. Contribute enough to capture the full employer match
2. If the employer matches up to 6%, contribute at least 6%
3. Only after the match is fully captured, consider whether additional contributions go into the same workplace scheme or a separate SIPP

The salary sacrifice calculator shows the combined benefit of employer matching and salary sacrifice tax savings.

This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.