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Average pension contribution in the UK

The UK government introduced the compulsory workplace pension scheme in October 2012. The initial implementation phase, known as “automatic enrolment”, occurred over six years. At the outset, the average company pension contribution in the UK was 2%, and the average employer pension contribution in the UK was 3%.

Does pension contribution in the UK reduce your tax-home income?Definitely
What is the workplace pension contributions amount in the UK?The minimum contribution is 3%, but it depends on the employer, workplace pension auto-enrolled, and pension scheme rules
Is the average pension contribution enough for a comfortable retirement?It depends on factors such as individual financial goals, other investment savings, and retirement goals
When did the auto-enrolment pension scheme occur in the UK?October 2012

What is the average pension contribution percentage in the UK?

The average pension contribution percentage in the UK changed on the 6th of April 2019. The original contributions and the amended figures and what they mean are shown in the table shown below.

DateEmployer contributionEmployee contributionTotal contribution
Up to 5 April 20192%3%5%
From 6 April 20193%5%8%

Source:  UK Gov

Based on a salary of £32,000 per annum, the average pension contribution for UK employees and employers looks like this:

Gross Salary£32,000
Minus Lower earnings threshold£6,240
Qualifying salary£25,760
Employer contribution (3%)£772.80
Employee contribution (5%)£1,030.40
Tax relief£257.60
Total contribution£2,060.80

As shown in the table above, your earnings threshold is deducted from your gross salary to give you your qualifying salary, on which pension contribution calculations are made. Pension contributions tax relief, which is generated on employee contributions, is also added.

The success of workplace pensions

The workplace pension scheme, with employees being automatically enrolled, was introduced by the UK government in 2012. It was introduced because many people relied solely on their state pensions for income in their retirement. The attractions of workplace pensions are the employer contribution element, which is a freebie as far as the employee is concerned, and the tax relief.

By law, typically, the average employee pension contribution in the UK is at least 5%. The UK’s average employer pension contribution percentage, also by law, is 3%. With some employer pension schemes, the employer matches your contributions or may even exceed them. It is down to the individual employer.

Since the introduction of automatic enrolment in workplace pensions in 2012, the participation rate has risen from 47% in 2012 to 79% in April 2021, which amounts to 22.6 million employees.

Depending on the lifestyle you aim for in your retirement, your workplace pension, plus your state pension, may or may not provide the retirement income you desire in retirement.

How much should I contribute to my pension?

According to the pension “half your age” rule guide, an easy-ready reckoner to indicate how much your pension contributions should be is to take the age at which you started contributing to your pension and divide it by two. The answer gives you the percentage of your gross salary you should ideally contribute until you retire.

Using this theory, if you start your pension when you’re 28 and your gross wage is £35,000 per annum, 14% of that means you should be contributing £4,900 per year or £408.33 per month. However, as shown in the table above, the UK average pension contribution total is only £2,060.80 (including both the employee and employer’s pension contribution) – some £2,439.20 per annum short.

What’s my target income in retirement?

The published the following figures in terms of the annual income you will need in retirement to enjoy three levels of lifestyle:

For a single personFor a couple
£11K – for a minimum lifestyle£17K – for a minimum lifestyle
£21K – for a moderate lifestyle£31K – for a moderate lifestyle
£34K – for a comfortable lifestyle£50K – for a comfortable lifestyle

How to calculate your retirement income needs

When planning what sort of retirement income you will need, you must consider a host of things. According to, these things include:

  • All income streams you will have in retirement.
  • Debts – paying back any borrowings.
  • Expenses – both you and your partner
  • Fuel bills.
  • Mortgage or rent costs.
  • Planned retirement age.
  • Retirement lifestyle.
  • State pension age.

What extra money might I need in retirement?

As well as the “everyday” costs during retirement, you also need to think about unforeseen extras. For example, you could have to carry out essential property repairs, or your car might break down and require expensive repairs. You might also face health challenges and have to pay healthcare costs.

You must consider everything to ensure you accumulate a big enough pension pot to satisfy all your wants and needs. We will come back to this again a little later on.

How long will my retirement be?

On average, we are now living longer. A report published on the ONS website entitled, “What is life expectancy? And how might it change?” indicates that men aged 65 can now expect to live to 85.6 and women to 87.8.

Whatever retirement age you choose, your retirement income may have to last longer than initially thought. This is because the average monthly pension contribution for UK workers in workplace pensions might not be enough.

How much state pension will I receive?

Most UK citizens are entitled to the state pension, provided they have made sufficient NI contributions. However, you must have completed at least 10 years’ worth of contributions to get the new state pension. In addition, 35 years’ worth of contributions will entitle you to the full new state pension of £185.15 per week. You may also have a workplace pension.

Suppose you make the average employee pension contribution for a UK workplace pension and get the average monthly pension contribution from your UK employer. You can use an online pension calculator to predict your pension pot’s likely size and potential retirement income.

If you are employed, your employer will likely offer you an average workplace pension UK scheme as long as you earn more than £10,000 per annum. But if you are self-employed, you should start a self-employed pension. In this case, you will be responsible for organising your own self-employed pension contributions, both in terms of NI contributions for the state pension and contributions to any private pension you may have.

How big should my pension pot be?

To decide how big your pension pot should be, we refer to the paragraph above entitled, “What’s my target income in retirement?” If we take those figures for the various lifestyles and the new state pension (NSP), the table below shows the size of the pension pot you will need. It also shows the figures without the new state pension.

For an annual income of:Including NSPExcluding NSP
£11K (minimum lifestyle)£21,250£169,200
£23K (moderate lifestyle)£175,000£323,100
£34K (comfortable lifestyle)£375,000£523,100

The figures above relate to a 67-year-old male using drawdown based on life expectancy.

According to ONS, the average median pension pot for those under 35-year-olds is £500, while for those aged 55+, it is £37,600. It’s only enough to cover a minimum lifestyle.

How to compare pensions

If you change employment several times during your working life, you might accumulate several workplace pensions. Some may perform better than others. You can use a pension calculator to compare how they are performing.

You may decide a pension transfer exercise is needed to amalgamate them into the best-performing account.

Most workplace pensions today are defined contribution (DC)schemes. You might have a defined benefit (DB) pension among them. You can transfer a DB pension scheme to a DC pension scheme, but it’s best to seek advice.

Another option you could explore is getting a pension refund. It could give you other investment opportunities, not just pension options. There is an informative pension refund blog on the Moneyfarm website.

How will higher pension contributions affect me?

Higher pension contributions should result in a bigger pension pot and, therefore, more income in your retirement years. But don’t forget that private pensions are investments, and as with any investment fund, values can fall as well as rise. The good thing is that pensions are long-term investments, and investing long-term is a recommended way to minimise risk.

If you can afford to pay more than the average pension contribution here in the UK, it is well worth considering, as the compound interest factor will work even more in your favour.

Some people have salary sacrifice schemes. It means they take home less money, but the salary sacrifice they make can build their pension pots even higher.

How to increase your retirement savings

If you and your employer are only paying the average pension percentage contribution into your UK workplace pension, you may find that it will not be enough, even taking your state pension into account. Therefore, you may look at other pension options, including a self-invested personal pension, or SIPP for short.

Many people review their financial plans in their 50s as the prospect of retirement begins to loom closer. You’ll find some useful information on 50s retirement savings on the Moneyfarm website.

Deferring state pension

If you decide to continue working after you’ve reached state pension age, deferring your state pension is an option you can take if you want to avoid paying too much income tax. You don’t apply for your state pension until you’re ready. However, when you apply, your payments will be increased to compensate for the deferral.


What is a pension contribution?

A pension contribution is the money an individual or their employer puts into a pension scheme towards their retirement. This money is invested and can be used to provide income in retirement.

What are some of the ways to increase pension contributions?

There are several ways to increase pension contributions. They include contributing a higher percentage of your earnings to a workplace pension scheme or workplace pension ‘salary sacrifice’, getting a higher-paying job, negotiating a higher contribution rate with your employer, and investing in a personal pension plan.

Can I contribute more than the average pension contribution?

Definitely. Some individuals may decide to contribute more than the average pension contribution to increase their retirement savings, especially if they are high-income earners. This can be done through a workplace pension scheme, a personal pension plan, or other investment vehicles.

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