For UK savers asking "how much should I be paying into my pension?" It is the decision guide — how to pick a contribution level, use the allowances, and avoid the lock-up and limit traps. It pairs with the workplace pensions guide (the scheme itself) and the tax-and-take-home guide (the relief maths); this one focuses on choosing and sizing your contributions.
A starting rule of thumb, then reality
A common heuristic: take the age you start saving, halve it, and contribute that percentage of your salary for life. Start at 30 → 15%; start at 40 → 20%. It is a rough prompt to start early, not a guarantee. The real test is whether your projected pot, plus the State Pension, covers the retirement income you want — which the Pensions Calculator can model.
The real cost is less than the headline
Because of tax relief, the amount leaving your take-home is always smaller than the amount entering your pension:
- Basic-rate payer: £100 into the pension costs £80 of take-home.
- Higher-rate payer: £100 into the pension costs £60 of take-home.
- With salary sacrifice: add NI savings, so a basic-rate payer's £100 costs around £72 of take-home.
Worked example: raising 5% to 10%
A £40,000 earner using salary sacrifice increases their contribution from 5% to 10%.
- Pension pot grows by an extra £2,000/year.
- Take-home falls by only about £1,400/year.
- The tax system absorbs the £600 difference.
This is why "pay rises into the pension" works well: if you get a 5% raise, directing 3% into the pension and keeping 2% still leaves you better off month-to-month while materially improving your pot.
The allowances to know
- Annual Allowance: £60,000 of tax-relieved contributions per year, or 100% of earnings, whichever is lower. Some very high earners face a tapered allowance below this.
- Carry forward: unused allowance from the previous three tax years can be added to this year's, useful for bonuses or windfalls.
- Non-earners: you can still pay in up to £3,600 a year and get basic-rate relief (so £2,880 of your money becomes £3,600 in the pot).
Exceeding the Annual Allowance triggers a charge that claws back the relief. See GOV.UK: Annual Allowance.
The lock-up: balance it against liquid savings
Money in a pension cannot normally be accessed until Normal Minimum Pension Age — 55 now, rising to 57 in 2028. The generous tax relief is the trade for that lock-up. Before increasing contributions aggressively, make sure you have a liquid emergency fund and no high-interest consumer debt; paying 20% on a credit card to get 20% pension relief is a wash at best.
Higher-rate relief: claim it or lose it
If your scheme uses Relief at Source rather than salary sacrifice or Net Pay, the provider claims only the basic 20% automatically. As a higher-rate payer you must claim the remaining 20% via Self Assessment or by contacting HMRC — otherwise it stays unclaimed.
Limitations
Allowances and the Normal Minimum Pension Age are 2026/27 and change with legislation. The half-age rule is a heuristic, not advice. For tapered allowances, large one-off contributions, or planning around the £100,000 trap, an FCA-regulated adviser is worthwhile. See the take-home impact in the UK Salary Calculator.
Written and maintained by Shaun da Silva, Finance Consultant. Learn how we ensure accuracy and quality in our Editorial Policy.