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Should I contribute more to my workplace pension?

None of the companies I've worked for offered pensions until it became compulsory so I never had a pension until this happened.

None of my employers have been very generous with their contributions, they've either been the minimum or 1 or 2% higher.

Currently my employer contributes 4% but I have the choice to contribute a higher % to it. The employer will always contribute 4% no matter what my contribution is.

If my employer matched whatever I contributed it would be a no brainer to contribute as much as I could, but without my employer contributing more is it worth me contributing more?
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Comments

  • dunstonh
    dunstonh Posts: 119,433 Forumite
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    If my employer matched whatever I contributed it would be a no brainer to contribute as much as I could, but without my employer contributing more is it worth me contributing more?
    It is absolutely worth you paying more (just as it would have been worth paying into one before auto-enrolment).

    You get tax relief on your contributions and if your employer supports salary sacrifice (which many do) then you get NI reductions as well.     For retirement provision, pensions beat savings accounts and ISAs in 99% of scenarios.



    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Marcon
    Marcon Posts: 14,064 Forumite
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    None of the companies I've worked for offered pensions until it became compulsory so I never had a pension until this happened.

    None of my employers have been very generous with their contributions, they've either been the minimum or 1 or 2% higher.

    Currently my employer contributes 4% but I have the choice to contribute a higher % to it. The employer will always contribute 4% no matter what my contribution is.

    If my employer matched whatever I contributed it would be a no brainer to contribute as much as I could, but without my employer contributing more is it worth me contributing more?
    How else are you going to build up funds to live on in retirement - and in such a tax efficient manner?
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • cloud_dog
    cloud_dog Posts: 6,313 Forumite
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    None of the companies I've worked for offered pensions until it became compulsory so I never had a pension until this happened.

    None of my employers have been very generous with their contributions, they've either been the minimum or 1 or 2% higher.

    Currently my employer contributes 4% but I have the choice to contribute a higher % to it. The employer will always contribute 4% no matter what my contribution is.

    If my employer matched whatever I contributed it would be a no brainer to contribute as much as I could, but without my employer contributing more is it worth me contributing more?
    Fidelity offer some useful guides which may help to put your current position in to some more context, especially the 'Power of 7'...

    https://retirement.fidelity.co.uk/retirement-savings-guidelines/#/

    Personal Responsibility - Sad but True :D

    Sometimes.... I am like a dog with a bone
  • @dunstonh yes it's salary sacrifice

    @marcon I don't know

    @cloud_dog thanks will take a look
  • penners324
    penners324 Posts: 3,498 Forumite
    Sixth Anniversary 1,000 Posts Name Dropper
    Absolutely. Pay in what you can afford.

    There used to be a rule of thumb that pension contributions percentage should be about what your age is.
  • MallyGirl
    MallyGirl Posts: 7,176 Senior Ambassador
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    Absolutely. Pay in what you can afford.

    There used to be a rule of thumb that pension contributions percentage should be about what your age is.
    I am pretty sure it was half your age and was related to starting to take pensions seriously. Someone starting out with not much accrued at 40 should be looking to contribute 20% of gross salary whereas someone not seeing the light till 50 should be going for 25%. Just a ball park to open the eyes of those thinking they were doing well with their 3% and 5% compulsory pension setups. Obviously not everyone can afford to contribute that much but it is good to understand the context.
    I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
    & Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
    All views are my own and not the official line of MoneySavingExpert.
  • cloud_dog
    cloud_dog Posts: 6,313 Forumite
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    edited 27 October 2023 at 12:13PM
    Absolutely. Pay in what you can afford.

    There used to be a rule of thumb that pension contributions percentage should be about what your age is.
    As per @MallyGirl post the old rule of thumb is half your age as a percentage when you start full time employment / contributing to a pension; this includes your contributions, TR, and the employer contributions.  It is just a rule of thumb and helps to ensure you hopefully have at least a minimum pension amount for retirement.  If you want to retire early or you want a more affluent retirement you need to increase the contributions.
    Personal Responsibility - Sad but True :D

    Sometimes.... I am like a dog with a bone
  • JohnWinder
    JohnWinder Posts: 1,862 Forumite
    Fifth Anniversary 1,000 Posts Name Dropper
    Tax, contribution matching and all the other perks aside, the more you contribute earlier rather than later the better it is (if the fund returns are positive not negative over the relevant period). Get out a compound interest formula and play with it.
  • Never mind whether your employer levers your contributions, the tax man does! 25% uplift for a basic tax payer, more for higher rate tax payers. Plus another 2-10/12% if your employer offers a salary sacrifice scheme.

    A good example of the power of compound interest in this article - When saving for 10 years pays more than saving for 40


    Save from 21 to 30, then stop. You will have a bigger pension than a saver who starts at 30 and stop at 70. The miracle of compound interest, Einstein's 'eighth wonder of the world’
    Signature on holiday for two weeks
  • @penners324 I can afford to

    @mallygirl not sure I could afford that much

    @cloud_dog I've thought about it because retiring is very important to me

    @JohnWinder I'm in my 40s so that ship has sailed

    @Mutton_Geoff I'm a higher rate tax payer
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