How you pay in to your pension

You pay a percentage of your wages in to your pension, and these are topped up by your employer and the government. These are called contributions.

With a workplace pension, like The People’s Pension, payments normally come from three sources:

  1. You
  2. Tax relief from the government
  3. Your employer

This is how it works

Each week or month, depending on how you get paid, you’ll pay a percentage of your qualifying earnings into your pension. It will probably come out of your wages before they get paid to you.

Then, the government allows you to benefit from tax relief on your contributions (subject to certain limits). In addition, your employer also pays in an amount based on your qualifying earnings.

Say you earn £25,000 a year before tax and your employer will be paying the minimum amount in to your pension each month. Minimum payments apply to any amount you earn, including overtime and bonus payments, between £6,032 and £46,350.

So in this example (figures based on 2018/2019 tax year) you’ll be saving:


Source: Money Advice Service workplace pension contribution calculator

You can see, instead of taking home £37.94 in your monthly wage, you’re getting twice as much put into your pension, which over the years really adds up.

This amount will increase from April 2019, with both you and your employer paying in more, to bring the minimum amounts paid into your pension account up to a total of 8% of your qualifying earnings. Your employer will let you know when these increases will happen.

Check how much you need to save for retirement

Use our calculators to check how much you’ll need:

  • Our life expectancy calculator can give you an idea of how long your pension savings will need to last.
  • Our future budget calculator can help you check whether need to save more into your pension to cover your costs in retirement – and if so, how much.


Use our calculators »


Next: Grow your pension pot

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