Guide How do pension contributions work?

Every time you get paid, your employer pays into your workplace pension. Most workplace schemes will also require you to make contributions, which are automatically deducted from your salary.

How much you contribute will depend on the scheme your employer has set up. Some schemes might make your contributions voluntary. Others will require employee contributions of at least a set amount. There are also schemes where your employer might match your pension contributions, up to a certain amount.

In an auto-enrolled workplace scheme, the minimum total contribution to be paid in each month is 8% of qualifying earnings (earnings between the lower and upper limits set in place by the UK government). The standard legal minimum contribution required by your employer is 3%, with the remaining 5% contributed by you as the employee. However, your employer may choose to increase their contribution, reducing what you’re required to pay. You may also choose to increase your personal contributions to boost your pension savings.

You can use MoneyHelper’s Pension Contribution Calculator to work out how much you and your employer might pay in over time.  MoneyHelper gives free and impartial guidance to help make your money and pension choices clearer.

The way contributions are taken from your pay depends on the type of pension scheme your employer is using. Learn more about putting money into your pension.

 How are contributions made?

Contributions are usually paid monthly into your pension pot. The money is invested into funds linked to a variety of different investment asset types – for example, equities (company shares), fixed interest securities or bonds, commercial property or cash.

Your workplace pension scheme will have a default investment fund. This will have been chosen by your employer, or in certain circumstances, a group of trustees. The trustees look after your workplace pension scheme to make sure it’s delivering good value for its members.

The default investment fund is where all your contributions will be invested. But you can also choose to change the funds you’re invested in if you wish. To review information about the funds you’re invested in, remember to activate and log in to your online pension account to view fund factsheets and key investor information.

Every contribution you make could help to build up your pension pot for retirement. Just remember, the value of investments can fall as well as rise and isn’t guaranteed. The value of your pension pot when you come to take benefits may be less than has been paid in.

If you have several jobs throughout your career, you may end up with multiple pension pots. Make sure your personal details are up-to-date in your accounts to keep track of them.