/ Money

How much should you be paying into your pension?

Treasure chest against blue background

There’s been a lot of noise about how much to pay into your pension this year. We’re all getting more freedom in how we spend our pension pot when we come to retire. But are we saving enough?

Figuring out what the changes to pensions mean for you is one thing, finding the money to put away to build a pension fund is another.

Our new pension guide, looking at how much you need to save, is designed to help.

We asked our members how much they thought they needed to live on for a comfortable retirement. The average amount was £18,000 per year.

Similarly, a NEST survey showed that pensioners’ sense of satisfaction with life increased markedly for those with income of £15,000-£20,000 and above.

So, how much to pay into your pension?

So people have pretty high expectations of what they’ll need in retirement.

We calculated how much you’ll need to start saving at different ages to have £15,000 or £30,000 per year in retirement. This included the state pension and assumed that you’d get nothing in the way of company contributions.

How much do I need to save for my pension illustration

At 35, you’ll need to squirrel away £215 a month for £15,000 and £654 for £30,000. By your mid-40s, you’ll need to be saving £322 and £981 per month respectively.

The state pension counts for a smaller proportion of the £30,000, so the savings needed are three times, rather than double, those required for £15,000.

The numbers are quite scary. With all the will in the world, is it possible to put these amounts away each month for a happy retirement with all the other demands on our income? Or is this just the new reality?

Peter Clifton-Dey says:
16 October 2014

It would be interesting to know how these figures are worked out and from what kind of pension scheme. Can you recommend the best, most secure scheme to use and maybe one that has a little risk but good returns

Martin Millen says:
20 March 2015

The answer to this is different for everyone and depends on many factors. If you want to get the best answer you should speak with a professional independent financial advisor, most independent advisors will provide an initial meeting at their expense so that you can both decide if it is in your best interest to pursuit the advice given 🙂


The moral of this is: don’t wait until you’re thirty-five before starting to save for a pension. Starting early with a small percentage of your gross income will be better than trying to catch up later. Outside the public sector there are very few schemes with employer contributions and virtually none that will be based on your final salary or with benefits that are guaranteed to track inflation. Therefore, an illustrations such as the one in the intro, frightening though it appears is probably entirely realistic.


John Ward, most. if not all, work-based pensions will have a contribution from the employer. They will just not be based on final salary when the time comes. It’s time public service pensions took the same structure so the rest of us will not be subsidising “gold-plated” final salary pensions. Those days are gone.


Thanks Malcolm – I was getting a bit confused and making the situation seem worse than it actually is. A few years ago, many companies – with what they were advised were excessive pension funds – decided to take an employer’s pension contribution “holiday” and stopped making [or substantially reduced] payments into their funds with the result that many funds ran into deficit. This has been bearable if the company survived because the funds are being replenished [but not necessarily to the same extent] and new, less favourable, schemes were introduced for new recruits. However, many firms have been taken over, gone into administration, or were liquidated during the recession and the residual pension funds are no longer adequate or have been closed. In most cases for people who had already retired and were drawing a pension the Pension Protection Fund would continue to pay the pension but working employees caught by the closure are not so well protected [as well as probably having missing years until they could get back into a pensionable job] and those in schemes that were not eligible for this protection might have lost their pension altogether or receive only a partial payment. This Conversation is obviously aimed at working people who are not in a company pension scheme but even if they eventually join a company scheme they should be aware that what happened before could happen again. It is best, therefore, for people to start making provision for retirement as early as possible so that if things go wrong down the line they will have something to fall back on. I realise that with all the other claims on peoples incomes, especially housing, making a hefty financial commitment to such a long-term thing as a pension does not seem so compelling. Many people living in high-value property might be regarding their home as their pension pot as they intend to move to a lower value property and invest the difference; I’m not sure that is a prudent plan either but maybe I am just too pessimistic.


I agree with you Malcolm on public sector pension schemes which are now completely out of line with conditions for people outside the public services. It used to be argued that the general pay and conditions package in the public sector was inferior to that in commercial and industrial employment but I suspect that has not been the case for a long time at any level; certainly the upper levels seem to be very well compensated for their endurance and the lower levels usually enjoy pay and conditions of service significantly better than the local average [national pay scales ensure that is the case in most rural areas]. There seems to me to be no justification for the perpetuation of final salary pensions since the ever-rising cost of the employers’ contributions to meet this liability is a priority charge on the Exchequer, on council revenues, and on other public services. Ultimately this is a tax on the working population who might not be so well treated, and on business.


John, when people join a pension scheme that simply builds a pot of money – not final salary – as far as I am aware both parties, you and the company, contribute but the money generally goes to a pension provider like an insurance company so is protected. The company cannot interfere with past contributions.


I am sure that is almost always the case but funds can be depleted if companies take a contribution holiday and if management expenses are too high. Presumably fund performance can also have an impact on the ability of a fund to meet its future commitments. Perhaps I shouldn’t have raised this as it’s getting away from the real issue which is getting people to realise that they really do have to make substantial contributions throughout their working lives [which now sometimes don’t start until their mid-twenties] if they are to have a reasonable lifestyle after retirement.