If you’re contributing to your workplace pension, you’re already taking an important step towards your future. Contributions you make today will be invested and grow over time. But it’s always tricky to know if your contributions are enough to put you on on track for a comfortable future.
This article breaks down the basics of a workplace pension – including considerations for contributions, HMRC guidelines and how to increase your pension over time.
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The default minimum for pension contributions
If you’re enrolled in a workplace pension, there’s a default minimum amount that should be going into your pension pot each month – and the good news is, you’re not footing the bill alone.
Your employer is legally required to contribute at least 3% of your salary, and you must add enough to bring the total minimum contribution up to 8%. This usually applies to what’s known as ‘qualifying earnings’ – that’s your earnings between £6,240 and £50,270.
On top of that, you’ll also receive tax relief from the government on your contributions, giving your savings an extra boost. So in reality, you, your employer, and the government are all helping to build your pension.
How much will I need for retirement?
While the default minimum pension contributions are a great starting point, they may not be enough to fund the lifestyle you want in retirement.
Current estimates suggest you’ll need around £25,000 a year to cover the basics – things like housing, food, and bills. If you’d like a few more luxuries, such as holidays or a new car, you might need closer to £40,000 a year.
To achieve this, you may need a pension pot of around £700,000 by the time you retire. Of course, this number can vary depending on factors like where you live, whether you have a partner to share costs with, and your individual lifestyle goals.
How to increase your contributions
If you’re not sure how much to contribute or where to start, don’t worry – you’re not alone! Most people don’t know what their pension is doing in the background, let alone whether they’re on track.
That’s where tools like Maji can help. With Maji, you can not only track your pension and set goals, but also easily increase your contributions at any time. Even if you’re not using Maji yet, the principles below can guide you on how much to aim for and why it’s worth getting started.
How to optimise your workplace pension with salary sacrifice
One of the most effective ways to boost your workplace pension contributions without reducing your take-home pay too much is through salary sacrifice.
With salary sacrifice, you agree to reduce your gross salary by a chosen amount, and in return, your employer pays that amount directly into your workplace pension. This reduces the amount of National Insurance you both pay, making it a tax-efficient way to save more for your retirement.
Some employers even share their National Insurance savings with you by contributing extra into your pension, meaning your pot could grow faster at no extra cost to you.
If your employer offers salary sacrifice:
- Ask how to opt in and what the process involves.
- Check if they pass on any employer NI savings—this can add hundreds to your pension each year.
- Use a pension calculator or platform like Maji to see how much more you could save using this method.
Optimising your contributions through salary sacrifice is a smart move that benefits your long-term retirement planning, especially when combined with regular increases to your contribution rate.
How Maji supports workplace pension
Thankfully, you can easily increase your workplace pension contributions through your Maji account. The pension provider Scottish Widows recommends an ‘adequate savings rate’ of 12% of your income to support a more comfortable life in the future. But a Labour party review published in 2016 set out a recommended savings rate of 15%. Maji suggests aiming for somewhere in this range with your monthly contributions. Remember this includes the free money from your employer and the government! So you don’t need to reach this level of contribution all by yourself.
Of course, everyone’s circumstances are different. Use Maji’s financial planner to find out what kind of lifestyle you’ll want and to set a personalised contribution target that will help you achieve your goals.
And remember, you can start your journey by increasing by just 1% today. Even a small amount of money, invested today, can grow a huge amount over the decades.
Ready to take control of your future?
Whether you’re already saving or just starting to think about retirement, small changes now can make a big difference later. Maji makes it easy to understand your pension, set goals, and adjust your contributions – all in one place.
If you’re not using Maji yet, check if your employer offers access. If they don’t, let them know you’d like a tool that helps you build a secure financial future.
