When it comes to pensions, there's a lot of varying advice about how much you should be saving. In reality, this is because there is no single right or wrong answer. Everyone's financial situation is different, and there are a lot of things to take into account.

We're going to look into the key factors you'll need to consider, so you can confidently work out how much you should be paying into your pension in 2025 and beyond.

1. How Much Money Will You Need?

The first thing you need to think about when deciding how much you should pay into your pension is how much money you think you’ll need when you retire.

The government has an interesting approach to pension savings that focuses on how much money you’ll need to live off each year. This is often based on your current salary, as you generally spend less money as you get older (e.g., you won't be commuting to work, you probably won't be paying for any childcare costs, and you might have paid off your mortgage).

The reason behind this method is that you generally spend less money as you get older. You won’t be commuting to work, you probably won’t be paying for any childcare costs, and you might have paid off your mortgage.

Use the guidelines below to work out how much money you'll need to target to maintain your current lifestyle in retirement:

Once you've calculated your target number, you can then find out how much your current pension pot is worth. If you're short on cash, now is the time to think carefully about prioritising your pension savings and adjusting your Budgeting strategy.

2. How Long Do You Have To Save? (The 50/2 Rule)

A practical method that helps you decide how much you should pay into your pension is to think about how long you have to save.

There is a popular rule of thumb that says you should take the age at which you first start paying into your pension and divide it by two.

• If you're 30 years old, you should therefore be paying 15% (30/2) toward your pension every month.
• If you start paying into your pension at 20 years old, you only need to contribute 10% (20/2).

The Power of Compound Interest

Paying into your pension as early as possible is always advised. This is because of a little thing called compound interest. Compound interest occurs when your money makes you more money, and then that new money makes even more money. The earlier you start, the longer your money has to grow exponentially.

3. What Are The Government Contributions?

A major boost to your pension savings comes from the government in the form of tax relief.

If you are a basic rate taxpayer, the government will effectively top up your pension by 25%. This means for every £80 you contribute, the government adds £20 to make the total contribution £100. Higher and additional rate taxpayers benefit even more. Your pension provider will automatically claim this basic rate contribution and add it to your pot for you.

4. What About The Workplace Pension? (Auto-Enrolment)

You will likely have more money saved in your pension pot if you are enrolled in a workplace pension scheme. This is because, by law, your employer has to contribute a minimum amount toward your pension pot.

The minimum contribution under the current auto-enrolment rules is 8% of your qualifying earnings:

• Your employer must contribute a minimum of 3%.
• You are required to add the remaining 5%.

You should take this mandatory contribution into consideration when deciding how much you should pay. However, based on the 50/2 rule and your required retirement income (from Section 1), consider if this 8% minimum is actually enough money to comfortably live off in retirement.

5. And The State Pension?

As well as your workplace pension and the government contributions, most people will also be eligible for the state pension.

The state pension is money paid by the UK government to anyone that has reached the State Pension age. It ensures that everyone has some form of income to support themselves during retirement, although the amount received is usually not enough to live comfortably on its own.

Key 2025/2026 Figures:

• The full rate of the New State Pension is currently £230.25 per week (approximately £11,973 per year). (Note: This is based on the 2025/2026 financial year.)
• To get the full New State Pension, you generally need 35 qualifying years of National Insurance contributions. You need at least 10 qualifying years to receive any State Pension.

You should always use the Government's State Pension forecast tool to get a personalised view of your entitlement.

6. Is There A Limit To How Much I Can Save?

If reading this has made you think about adding more to your pension, you might be wondering if there's a limit to the amount you can save with tax benefits.

There isn't a limit to the amount you can save, but there is an Annual Allowance which limits how much you can contribute across all your pensions and still receive tax relief.

Key 2025/2026 Figure:

• The standard Annual Allowance is £60,000 for the 2025/2026 tax year (up from £40,000 in previous years).

This means you can add up to 100% of your annual salary, or the £60,000 Annual Allowance (whichever is lower), to your pensions and still receive the associated tax benefits.

Summary: Take Control of Your Retirement

It's important to keep track of your pension contributions to ensure that you're covered financially in later life. Your pension is a long-term asset, and tracking its value is crucial for your overall financial health.

If you need an easy way to manage and visualise your long-term wealth, Emma's Net Worth feature lets you track your pension alongside your investments and other financial accounts.

To get to grips with saving for retirement and consolidating old pots, head to the Save tab and Opportunities in Emma to find easy ways to start a relationship with a low-cost, modern pension provider like PensionBee.