How much should I pay into my pension?

Learn how much you should put into your pension based on four key factors, plus two rules of thumb to calculate pension contribution amounts.

When it comes to pensions, one of the questions we're asked most often is seemingly a simple one: how much should I be saving? But that's actually a really tough question!

However, we like those ones, so we've come up with a couple of quick ways you can work it out. Plus, there'll be plenty of food for thought for you along the way. In this article, we'll help you answer: how much should I pay into my pension?

How much should I put into my pension?

While it is useful to have a few general rules, the truth is how much you should pay into your pension depends on your unique situation. Here are the 4 things you'll need to think about:

  1. When do you want to retire?
  2. What savings do you have right now?
  3. How much money would you like each year in retirement?
  4. How much can you afford?

Let's break it all down.

1. When do you want to retire?

When you're saving for the future, the first thing you'll want to think about is the end date. When do you want to stop saving and access your pension pot? It goes without saying that the earlier you stop working, the longer your pension will have to support you.

Some people are very interested in retiring early, pumping as much as they can into their pension and sacrificing lots of flat whites along the way. Others are not so fussed, aiming for more of a work-life blend into their twilight years.

When you're ready to start withdrawing, your pension can be used in a number of ways. One of the common is by purchasing an annuity. With an annuity, you use your pension pot to buy a fixed income from an insurance company every year until you pass away. Obviously, the younger you are when you retire, the more an annuity is likely to cost. Equally, if you want to do your own thing with the money, the younger you are when you retire, the longer it likely needs to last you.

When you’re thinking about how much you want per year, you can also include the State pension. Currently, you'll need to wait until you're 65 to access this (rising to 67 in 2028).

It varies per person, but the average couple will receive around £15,000 a year. Again, if you’re planning on retiring around that time, the State pension will contribute to what you need. If you’re planning on early retirement, you’ll need to bridge that gap yourself.

When you want to retire is a very personal choice that reflects your own unique circumstances. Have a think about when exactly you'd like to stop working , then factor that in when you decide how much you want to save.

2. What savings do you have right now?

Another important step in calculating your pension contributions is you current savings pots. Are you starting from zero, or have you already built up a pot?

The older you are and the less you have in savings, the more you'll need to add your pension today. This is because you have less time to save and take advantage of compound interest and growth of your pension pot.

Take a look at the savings you have today. Do you already have a pension pot or two from previous employers? What about other savings accounts like a LISA or investments? Keep this in mind when thinking about your future pot - it's always better to not start from zero?

Not sure how to locate old pensions? Check out our guide on finding old pensions. Of course, you can also transfer your old pots into one, easy-to-manage place for free with Penfold.

3. How much money would you like each year in retirement?

What does your dream retirement look like? Is it living it up on a sunny beach? Skiing holidays and classy meals out? Or is it as simple as leaving some money for the ones you love?

Everyone is different and the goals you have for life after work are as individual as you are. The important thing is to decide what's right for you. Then, you can work out how much you'll need.

A common concern is that you’ll need to match your current yearly income - but this often isn't the case. When you stop working, chances are you may not have to continue paying a mortgage or commuting costs.

However, bear in mind that retirement spending may not be consistent. While people tend to spend less on things like travel when they get older, they may need to spend more on healthcare.

The average couple spends roughly £27,000 a year in retirement.

A survey by Which? suggested that the average couple spends around £27,000 a year in retirement. Those who want a more luxurious retirement spending around £42,000, mainly on long-haul trips abroad.

We asked some Penfold customers how much they think they'll need:

“I’m going for about £50,000 for my wife and I. I’d like to see all the places on my bucket list”
“£20,000. I like working, and I think I’ll be able and want to continue into retirement age. I’m also struggling at the moment to make higher contributions than that because I’ve just bought a house”
“I have no idea. I should use this pension calculator. I read a lot of things about finances but at the moment I just pay in what I can afford, which varies”.

Even if you don’t have a specific number in mind, try to at least envision the sort of life you're aiming for. That will give you a great way of working backwards and nailing down how much you should save.

4. How much should I put in my pension?

The final step - working out your magic number. Some companies also go by a rough rule of thumb: to take your current age and halve it, and that’s the amount of your pre-tax salary as a percentage you should be saving. But in the world of freelance and self-employed workers, it’s not always that clear cut. To help you plan our your retirement, we've built a nifty pension calculator. Simply enter:

  • the age you want to retire (step 1)
  • the pension pot you have now (step 2)
  • a rough estimate of the income you want in retirement (step 3)

Then, we’ll calculate how much you need to save to reach your goal.

Pension contribution rules of thumb

When you're just getting started, choosing how much to put in your pension can feel a little like guesswork. So, here are some broad rules of thumb to get you started. There are a couple of quick calculations anyone can do to give themselves a ballpark figure for monthly pension contributions. They are:

  • Half your age rule
  • Two-thirds rule

Half your age rule

The half your age rule goes like this. Take the age that you started saving into a pension and divide it by two. This number (as a percentage) is how much of your pre-tax salary you should into your pension every month.

For example, if you started saving aged 30, you should aim to add 15% of your pre-tax salary into your pension every month. For someone earning £35,000, that would mean £300 a month.

For those in employment, this figure can be split between your contributions and your employers so if your employer is adding 3%, you’d need to contribute 12%.

Two-thirds rule

This rule helps give you a rough guide of how much you’ll need in your pension pot when you reach retirement to support a comfortable lifestyle. Essentially, to maintain a quality of life similar to your current one, you should try to achieve a yearly income of 2/3rds your current income in retirement.

Earn £35,000 a year? For retirement, you’ll want around £23,333 a year (before tax) in retirement. Let’s say you’re aiming for a retirement of 20 years - that means you’ll need a pension pot of £23,333 x 20. A total pot of £466,660.

From there, depending on your age and current pension size, you can roughly work out how much you’ll need to save each month and year to reach that figure. Don’t forget to factor in investment returns and tax relief! Of course, while these methods are helpful guides, what it really comes down to is your personal financial situation.


How much you should put into your pension, ultimately, comes down to your financial situation and long-term goals. It’s worth bearing in mind that this is just a tool to help you work out what you need to be putting away to meet your individual goals.

You'll also need to look at your other outgoings and budget to see how much you can afford to save. As we mentioned, everyone is different. Just follow the steps we've outlined here and sit back and relax, safe in the knowledge your future is one big step closer to being taken care of.

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1. Get a Penfold account by registering your details online or with our app.

2. Transfer an existing pension, or make a one-off or recurring payment (pause or adjust any time).

Done! Check savings progress, change investment plan and more with our app or online dashboard.

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