How much should you be saving into your pension

How much you pay into your pension each month can make a big difference to your retirement. Find out why we think 12.5% is the magic number.

By John Lawson

As a broad rule of thumb, we recommend you pay in a total of 12.5% between you and your employer.

But the actual amount you should save depends on your own situation. For example:

  • When you start saving: The earlier you start, the less you'll need to save.
  • Whether you have any existing retirement savings: Those with an existing pension savings won’t have to save as much compared to those who have saved nothing to date.
  • How much you expect to get from the state pension: The new single state pension pays out the maximum amount – currently £164.35 a week – to those with 35 years worth of national insurance contributions or credits.
  • The income and lifestyle you want in retirement: The higher your desired income in retirement, the more you will have to save to reach your target.
  • When you plan to retire: The earlier you plan to retire, the more you will need to save – and, conversely, the later you plan to retire, the less you will need to save.
  • How much risk you are prepared to take when investing your savings: In general, those who take more risk should expect higher returns on their savings, so they may be able to get away with saving a bit less. However, higher risk investments don’t always lead to higher returns, and a dip in the value of your pension pot close to retirement may force you to save a lot more or work for longer. 

As you can see, there are several factors that influence how much you have to save to reach your retirement goal.

The easiest way to get a good idea of how much you should be saving is to carry out some scenario planning.

Aviva’s Shape My Future tool will give you a good idea of how much you should be saving to fund the sort of retirement you have in mind.

Before you use an online planner, it makes sense to gather details of all your existing pensions and get an up-to-date state pension forecast.