Saving into a pension
Some employers may pay more into your pension, if you also agree to pay more in.
If you’re a member of a workplace pension scheme, your employer may be contributing to your pension pot. Often, employers will contribute a proportion of your salary or wages.
Some employers will agree to pay more to your pension pot to help you build retirement benefits faster, if you agree to increase your contributions to the scheme too. This is known as ‘contribution matching’.
Most employers will have a limit to the additional contributions that they will match. See the example below for a more detailed breakdown.
An example of contribution matching
Jane earns £20,000 a year and is a member of her employer’s workplace pension scheme. She contributes 3% of her salary into the scheme and her employer contributes 5%. Jane’s employer has agreed to match employee contributions between 3% and 8% of her salary.
Jane is considering increasing her contributions to benefit from her employer agreeing to match her additional contributions.
Currently, Jane is paying 3% of her salary of £20,000, or £600, into the scheme each year, while her employer pays 5%, or £1,000, a year. So, the total contribution paid in to the scheme is £1,600 a year (Jane’s contributions are paid from her salary before tax is deducted).
If Jane increases her contributions to 8% of her salary, she will then be paying £1,600 a year into her pension scheme. Her employer has agreed to match Jane’s additional 5% contribution, so will pay an additional £1,000 a year. This increases the total contribution to £3,600 a year.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.