What makes a good pension contribution?

38.23% of companies on cord provided details of their pension plans online.

86.09% of these offered a statutory minimum pension contribution of 3%. 10.60% offered a 3–6% contribution, while 3.31% offered 7% or more as a pension contribution.

A pension contribution above 3% puts a company in the top 25% of pensions offered. Contributing 6% or more puts a company in the top 5%.

With some exceptions (for example, EU citizens in EU cross-border pension schemes), all UK-based workers aged between 22 and State Pension age earning more than £10,000 per year must be enrolled in a pension scheme. The equivalent of 8% or more of your salary goes into your pension, with your employer contributing at least 3% of this. So, if you see something like “8% pension with 3% employer contribution” on a job description or offer letter, it’s not a benefit. It’s a legal requirement (like public holidays).

However, employers can opt to increase their contribution, and some employers make generous contributions into pension schemes. Pensions are tax efficient, so are a cost-effective way for companies to offer prospective hires more money.

Check your minimum contributions, as these will come out of your paycheck, but otherwise the more the better. Many pension schemes will offer you a choice of how much you contribute to your pension per month, with the employer matching your contribution up to a certain level.

For example:

  • Pension contribution of minimum 4%, matched up to 8%

… would mean that, by default, you and your employer would meet your 8% minimum contribution by each contributing 4% of your salary. However, you could opt to contribute anything from 4–8% of your salary and your employer would match it. So you could add 16% of your salary into your pension with only 8% of that contribution coming out of your paycheck, the rest being paid by your employer. Above 8%, they’ll no longer match your contribution, so if you wanted to put in 20% you’d have to contribute 12% yourself.

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