How much should I pay into my pension pot?
How you work this out is by figuring out how much you’d like to retire on (realistically), then working backwards to how much you should be saving a month.
- If you earn between £22,400 – £32,000 then the government suggests you aim to retire on 67%.
- If you earn between £32,000 – £51,300 then the government suggests you aim to retire on 60%
- If you earn 50% then the government suggests you aim to retire on 50%
For example, the average UK salary is £24,500, which means you’d need 67% to retire comfortable, which is approx. £16,500 a year. Don’t forget, you’ll need a lot less to retire, as you won’t have commuting costs etc.
Using the above salary average as an example, if you started at aged 22, you’d need to be putting away between £50-450 a month in order to have £16,500 by the time you retire at the average age of 68. But this of course depends on how good your pension scheme is (the interest of the account/pot you put the money into to grow). Also this figure doesn’t take into account how much your employer puts into the pot.
To make it simple, Money Saving Expert suggests taking the age you start your pension and halving it. Then put this percentage of your pre-tax salary aside each year until you retire.
So, how much…
So the answer really is dependent on how much you can put in (dependent on your monthly expenses), the age you start to contribute and what kind of pension scheme you have (percentage increase wise).