How much should I pay into my pension? This is understandably a question on most people’s minds when they start thinking about
retirement. It’s also a question that has no single answer - in fact the answer will differ for every one of us. So let’s take a look at the things you need to consider so you can work out how much you should be paying into your pension.
One of the first questions to ask yourself is what kind of retirement you hope to have. No one wants to be living with just their state pension to rely on but, on the other hand, if you’re expecting to maintain the lifestyle you’re used to, with possibly plenty of socialising, a couple of luxury holidays a year, regular upgrades on your car and so on, then you need to be aware that you’ll probably need to pay in a substantial amount to maintain this sort of lifestyle when you’re no longer working.
The starting point is to work out roughly the amount you think you need to live on each year. Once you have that figure, then it’s a case of working out how much you need to have in your pension pot to achieve this goal and what your contributions will need to be to get you there. These contributions depend on 4 important factors - the size of your current pension pot; how much you are currently contributing; when you want to access your pension (you can normally do this from the age of 55) and finally, how old you are now.
Online calculators, such as the Fidelity
retirement calculator, can help you work out how much you should pay into your pension based on how much you might need whilst in retirement.
The more you save now, the better, so it may be worth finding different ways to
boost your pension pot.