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How to calculate what I need to pay into a pension

This article provides a clear breakdown on how to calculate exactly what you should be contributing to your pension to get the retirement you want

Written on 21 September 2021

If you are living and working in the UK, it is to be expected to have questions around your pension entitlements, and what you should ultimately be contributing to it too.

There are many things to consider that you may not have factored into the decision making.

What kind of life you want to lead upon your retirement needs to be one of the main areas you consider as you plan for your pension.

Below is a clearer breakdown on how to better calculate exactly what you should be contributing, and why.

Key factors for planning your pension

Despite most individuals that are living and working within the UK being entitled to a State Pension from the government (due to contributions made via National Insurance payments), for others, this will not be enough, and are keen to build something much more substantial within a separate pension fund, in the aim of funding their retirement successfully.

Depending on the lifestyle that the individual seeks for retirement, the size of the contributions that would be made to this separate pot will vary.

The four main factors that you will need to use as a guide, to figuring out exactly what you should be aiming to contribute to your funds are:

  • What you can afford to save annually based on your employment income earnings per year
  • How long of a timeframe you have to reach the figure you would like to save
  • What type of lifestyle and certain needs you aim and plan to have after retirement
  • If the amount you are aiming to save for retirement will sustain your choice of lifestyle for a longer period of time (potentially lasting 20-30 years) once you retire

Pension contributions

It goes without saying that the earlier you begin to save for your pension, the better. And whether you begin by just putting as much away as your current salary will allow, it will most often than not be able to grow over time, due to wage and salary increases.

However, many people do not start actually contributing to their retirement funds with dedication until later on in life.

But this then comes with its own sense of perks, in the sense that you will probably have a much clearer idea of what exactly it is that you will be funding.

Assessing your assets, spending and family set up can allow you to analyse exactly what you will need, to be able to live comfortably upon retirement.

A clearer, broken-down list of some of the most important considerations when planning how much pension you will need would be:

  • Any and all income you will have (including all savings and investments)
  • Debt repayments (planning to try and pay off any debt you have before your retirement begins)
  • Overall cost of running your home (budgeting for continued mortgage/rent payments, but ideally aiming to have paid off your mortgage before retirement)
  • Other expenses (fuel costs, leisure activities, birthdays, clothes, holidays)
  • Utility bills
  • Your partner’s expenses (if applicable)

There are multiple factors which contribute to the calculation of your pension rate as an individual.

As well as being able to use a pension calculator to give you a broad overview of your UK pension rate, you are also able to seek expert advice which can provide you with both an estimate of your UK pension rate, as well as tailored advice on how to potentially increase it.

How would I benefit from speaking to a pensions and retirement planning expert?

Speaking to an independent financial advisor that specialises in pensions and retirement planning will help you establish the most suitable course of action.

They will give you a clear explanation of your current pension status and what your predicted funds will be for retirement. They can then use this information to show you the benefits (and drawbacks) it could bring you if you are to combine your savings into one scheme.

Using our Pension Shortfall Calculator

Your pension shortfall is the difference between what you would like to take home from your pension during retirement and your pension forecast.

It's vital that you regularly review the size of your pension shortfall to be able to make the necessary adjustments to close the gap.

If you have a pension or are considering how much you need to save to ensure your income is sufficient during your retirement, simply enter your details into our pension shortfall calculator and get an idea of your estimated pension shortfall.

Request a free introduction to a pensions and retirement planning expert

Our free introduction service will connect you with a hand-picked independent financial advisor that can assist you with pensions and retirement planning for expats.

Once you have made your request, you will get:

  • Free initial consultation to discuss your situation and have your general questions answered.
  • Free, informal guidance on the options available to you.
  • Overview of any fees and charges should you wish to engage the advisor

Request free introduction to a pensions and retirement planning expert

Our free introduction service will connect you with a hand-picked independent financial advisor that can assist you with pensions and retirement planning for expats.

Testimonials from people who have used this pension advisor introduction service

The consultant was exceptional, very comprehensive and clear.

Richard B. Canada, Pensions

I was very impressed with the speed and quality of the communication and the amount of information I got in a 30-min consultation. There was no undue pressure on me to buy anything, and it was nice to be able to talk to someone who understood both the UK and US markets. I think this would be an excellent service for anyone with substantial pension pots, is unsure about leaving their money where it is or to transfer it to where they now live, and is looking for either just advice and help with admin or wants a full service. 

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Neil B. Australia, Pensions