Workplace Pension Basics
Since 2019, all UK employers must automatically enrol eligible workers into a workplace pension. This means money goes into your pension from three sources: you, your employer, and the government (via tax relief).
Minimum Contributions
| Source | Minimum % | On £30,000 Salary |
|---|---|---|
| You (employee) | 5% | £1,500/year |
| Your employer | 3% | £900/year |
| Total minimum | 8% | £2,400/year |
Percentages are on "qualifying earnings" — the portion of your salary between £6,240 and £50,270.
Tax Relief — Free Money from the Government
Pension contributions get tax relief, which means the government adds back the tax you would have paid. For a basic rate (20%) taxpayer contributing £100 to their pension, only £80 actually comes out of their pay — the £20 tax is added by the government.
Higher rate (40%) taxpayers can claim an additional 20% back through Self Assessment, making a £100 pension contribution effectively cost just £60.
How Much Should I Save?
A common rule of thumb: take the age you start saving, halve it, and contribute that percentage of your salary for life. Starting at 25? Aim for 12.5%. Starting at 30? Aim for 15%. The minimum 8% is better than nothing, but unlikely to fund a comfortable retirement alone.
The Power of Starting Early
Starting at 25 with £200/month at 5% growth = £395,000 at 68
Starting at 35 with £200/month at 5% growth = £220,000 at 68
Starting at 45 with £200/month at 5% growth = £115,000 at 68
Salary Sacrifice Pensions
Some employers offer salary sacrifice pension schemes. Instead of you contributing from net pay, your salary is reduced and the employer puts the money directly into your pension. This saves you both income tax AND National Insurance — typically saving an extra 8-12% compared to a normal pension contribution. See our salary sacrifice calculator to see the saving.
Annual Allowance
You can contribute up to £60,000 per year to pensions with tax relief (or 100% of your earnings if lower). If you earn over £260,000, this tapers down to a minimum of £10,000.
See how much your pension could be worth
Pension calculator →