How to grow your pension

We invest your pension savings, working to give you more for the future - but you might be able to make your money work even harder. It all starts with understanding the amount of income you need in retirement. Once you know that, making small changes now could mean a big difference to your future.

How much should I contribute to my pension?

As a rough guide, it’s often suggested that you should put between 12-15% of your annual salary in your pension pot. However, this depends on your circumstances and whether you can afford it.

Remember, the more you pay into your pension pot, the more income you’ll have when you retire – especially if that’s topped up with employer contributions and tax relief.

For some people, paying off a mortgage takes priority over growing their pension savings, but it’s worth considering a plan that allows you to balance both. It’s also worth thinking about putting more into your pension rather than assuming other savings or investments, like ISAs, are the best place for your money. Always check the rates you get so you can allocate your money cleverly and build up more for your future.

The same goes for any other pension pots you might have. It’s always worth checking how your money’s performing and the fees you’re being charged.

Is there a minimum pension contribution?

The minimum contribution required by law for eligible workers is 8% of their qualifying earnings. Your employer needs to contribute at least 3%, which means most people contribute 4% of their salary, with the government adding 1% in tax relief.

Is there a maximum pension contribution?

There is no maximum limit, so you can contribute as much as you want to your pension pot. If the total added to your pot in a single tax year reached over £60,000, you’ll need to start paying tax on your contributions.

Should I increase my pension contributions?

Maximising your pension contributions can help you build up your savings for the future – especially as you can get extra money from tax relief and employer contributions every time you top up your pot.

There are some milestones that could make it easier for you to put money aside…

Changing jobs

If you change jobs, it’s a smart idea to try and arrange the highest possible pension contribution that you can at the start.

Getting a lump sum

If you receive a lump sum, like a bonus or an inheritance payment, it could be a good time to boost your pension pot with an additional contribution.

Getting a pay rise

If you’ve been automatically enrolled into a workplace pension, your contributions are based on a percentage of your pay. So, if you get a pay rise, your contributions will automatically increase. As you'll be taking home more money, you could boost your pot even more by making additional contributions.

Even small changes can make a big difference to your future. Let’s say you started saving £7 a week. That works out at £1 a day – doesn’t sound much, right? If you did this for 10 years, you’d have pocketed a huge £3,650. And that’s not including the extra money you could get from tax relief or from investment performance.

Adding your spare change to your pension pot can have a big impact. For example, paying an extra £2.50 a week from the age of 22 to 68 can grow your pot by a staggering £13,600.

Contribution matching

Some employers will pay more into your pension if you increase your contributions too. It’s worth checking if your employer does this as it’s an easy way to add extra money to your pension pot.

You can change how long you save for

The longer you save, the more time your money has to grow, which could give you a bigger pot of money for your future.

If possible, you should avoid withdrawing too much when you reach 55 just because you legally can. After this age it’s likely you’ll live and work for a while longer, meaning more time to increase your pot through tax relief and employer contributions. If you’re planning on keeping your money invested for longer, don’t forget to change your Nest retirement age.

You can change the way your money is invested

When you join a pension scheme, your money is automatically invested into their default fund. Nest’s default fund is designed to work for the majority of our members but you can switch to an alternative fund to match your religious beliefs, ethical choices or the level of investment risk you’re willing to take.

It’s never too late

You’re not alone if you feel that you haven’t done enough to secure the future you want. The good news is that it’s never too late to change your situation.

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Check the balance of your pot, make extra contributions and change how your money’s invested by logging in to your online account.