Contributions to your pension pot

Good news – the total amount saved towards your retirement has gone up. There have been some important changes to the minimum amount that’s paid into your pension pot. These payments are called contributions.

When you’re automatically enrolled into a pension (like The People’s Pension), by law there are set minimum contribution levels.

These contributions are completely separate from the State Pension which, at £8,546.20 a year or £164.35 a week currently (based on someone reaching State Pension age on or after 6 April 2016 with a full National Insurance record), is likely to need topping up for most to enjoy a more comfortable retirement.

The total minimum contribution went up on 6 April 2018. This means the total minimum amount your employer pays into your pension pot, and the amount of money the government puts in (known as tax relief) based on your part of the total minimum contribution, just got bigger. This is great news as it means you’ll be getting even more out of your workplace pension…

How your contributions could look

You might have noticed that the amount you pay in may have gone up too. This is to make up the difference between what your employer pays in and the total minimum contribution.

The table below shows how your levels of contributions would look if your employer pays the minimum contribution.

Employer minimum contribution Employee contribution Tax relief on employee contribution Total minimum contribution
Until 5 April 2019 2% 2.4% 0.6% 5%
6 April 2019 onwards 3% 4% 1% 8%

Remember… whatever money you put in to your pension will be topped up

Think of it as extra ’free’ money. It’s a very effective way to add to your retirement savings! Our video ‘Understanding pension basics’ explains how this works:

 Watch the video: Understanding pension basics »

If you stop your contributions, your employer may also stop paying in too.

How these changes can benefit you

This increase means even more is added to your pension pot from your employer and the government – through basic rate tax relief (higher rate tax payers may have to claim the rest from HMRC). Think of it as an even bigger helping hand to help you save for the lifestyle you want during retirement.

All contributions are paid into a pension account in your name, so remember it’s yours to keep!

These contributions are invested. When you retire, the value of your account is used to provide retirement benefits for you and, if you wish, your dependants.

For example, using basic rate tax relief (higher rate tax payers will get more), here’s how contributions could change if you’re currently paying £24 per month:

So for the £24 you pay in, your employer and the government adds £26 extra free money to your pension pot each month.

So for the £40 you pay in, your employer and the government adds £40 extra free money to your pension pot each month.

This is a very effective way to save so don’t lose it!

How you’ll receive tax relief depends on how your contributions are taken from your pay – before or after tax.

Read more about tax relief »

What happens next?

The next increase will happen on 6 April 2019. Your employer may write to you to tell you about the change before it happens.

You won’t need to do anything – your company payroll will make the changes for you.

The best news is that the increase in contributions should mean you have more money put aside in your pension pot for when you retire.

Help & support: Contributions »
Why do I need a workplace pension?
Grow your pension pot

Next: Make changes to your pension

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