The question of how much to save into your pension pots in your 50s is an important one as it will have a significant impact on your retirement income.

How much should I pay into my pension pots in my 50s?

When considering how much you should pay into your pension in your 50s, you have two options:

Set a current savings target. The first option is to apply a rule of thumb, whereby you save half of your age as a percentage of your salary into your pension each year. This is an easier format to work with and is very straightforward to calculate. This approach may work better for those with one income stream or less free cash flow each month and will be discussed in detail in this article.
Set a future capital sum target. The second option is to work backwards, by deciding how much income you are going to need when you retire and then converting that figure into the capital sum required to generate that level of income. You can then add up all your pension and savings pots to date and then make a savings plan to hit the capital sum target in the future. This option is more likely to apply to those with more free cash flow each month, multiple income streams and those wanting a higher income in retirement. We have a separate article dedicated to this method called “How much should I have in my pension savings pots at 50” and it won’t be covered in this article.

Setting a pension savings target in your 50s.

As mentioned above, an easy way to decide how much you should pay into your pensions in your 50s is to save half your age as a percentage of your salary. For example, if you are 50 years old, you should aim to save 25% of your salary into your defined contribution pension scheme (most workplace pensions and private pensions). The older style defined benefit pensions are more complicated as these pay out a % of your final salary upon retirement and were most common in public sector organisations and are out of the scope of this article.

This rule of thumb is based on the idea that the earlier you start saving for retirement, the less you will need to save each year to achieve your retirement income goals. By starting to save early in your career, you can benefit from compound interest and investment growth over a longer period, which can help to build a larger pension pot. However, as you progress further to retirement age, you will benefit less and less from compound interest, so you need to pay more into a pension each year to make a significant difference to your overall pension pot.

To put these numbers into context, the tables below illustrate some typical salaries and how much you should be contributing to your pension pots at 50 (25%) and 59 (29.5%).

Age	%	Salary	Annually	Monthly
50	25	£25,000	£6,250	£520
50	25	£30,000	£7,500	£625
50	25	£40,000	£10,000	£833
50	25	£60,000	£15,000	£1,250
50	25	£100,000	£25,000	£2,083
50	25	£150,000	£37,500	£3,125

Saving half of your age as a percentage of your salary at age 50.

Age	%	Salary	Annually	Monthly
59	29.5	£25,000	£7,375	£614
59	29.5	£30,000	£8,850	£737
59	29.5	£40,000	£11,800	£983
59	29.5	£60,000	£17,700	£1,475
59	29.5	£100,000	£29,500	£2,458
59	29.5	£150,000	£44,250	£3,687

Saving half of your age as a percentage of your salary at age 59.

What should my pension contributions be in my 50s?

What’s startling from the tables above is just how much money should be saved into your pension pot whilst you are working. Don’t forget that this is a total contribution target, which is made up of your own ‘employee contributions’ plus ‘employer contributions’ made by your employer. There will also be a tax relief element, with higher and additional-rate tax payers being entitled to additional tax-relief via self-assessment if you are saving funds into a pension from your taxed take-home pay. This can also give a handy boost.

As you may remember, about 10 years ago the UK government introduced auto-enrolment into a workplace pension scheme for employees to make it easier for people to accrue pension savings. However, while there are various thresholds and considerations to take into account, the actual contributions made by the employee and employer combined are often below 10%, which is well below the 25% to 29.5% guideline someone should be paying into their retirement savings in their 50s.

When it comes to pension contributions, what you may notice is that an enhanced level of employer pension contributions is typically offered as an incentive to more senior roles and, more generally in the financial services and energy industries. According to the Pensions Regulator:

“In financial services, for example, organisations contribute an average of 9.5% of their employees’ salaries. Businesses in the energy sector, on the other hand, contribute 7.1% of an employee’s salary on average. It is worth noting that the average employer contributions for men across all industries is 4.6% and for women, it is 4.4%.”

With this in mind, if the average employer’s pension contribution is 4.5%, you will personally need to contribute 20.5% of your salary at age 50 and 25% of your salary at age 59 to meet the guideline savings goals.

Age	% of sal.	Emplyrs cont.	Your cont.
50	25	5	20
50	25	6	19
50	25	7	18
50	25	8	17
50	25	9	16
50	25	10	15
50	25	11	14
50	25	12	13
50	25	13	12
50	25	14	11
50	25	15	10

What your employee pension contribution should be at age 50.

Age	% of sal.	Emplyrs cont.	Your cont.
59	29.5	5	24.5
59	29.5	6	23.5
59	29.5	7	22.5
59	29.5	8	21.5
59	29.5	9	20.5
59	29.5	10	19.5
59	29.5	11	18.5
59	29.5	12	17.5
59	29.5	13	16.5
59	29.5	14	15.5
59	29.5	15	14.5

What your employee pension contribution should be at age 59.

In theory, these numbers are all good and well, but they are incredibly high and some employers may be less happy to help you significantly increase your pension contributions into their workplace scheme, or may only allow you to do this once a year. Not to worry though, all you need to do is take the total contributions from your employment (which could be as low as 8%) and save the difference to your target percentage into your workplace pension, or a private investment scheme from your take-home pay, such as an ISA or SIPP – be sure to speak to a financial adviser to understand the tax implications/benefits of each of these options.

The bottom line to pension savings in your 50s.

The figures outlined in this article are clearly staggering and it’s unlikely that everyone will hit the targets given the ever-growing pressure on salaries. However, you are 100% guaranteed to miss 100% of the targets you don’t set, so even if you are unable to get there, you will be better off in the long run by setting yourself difficult goals.

Nonetheless, the scale of the pensions savings you will need to accrue to give yourself a high standard of living in your retirement years is not to be underestimated and our article ”How much should I have in my pension savings pots at 50” is well worth reading to find out for yourself just what your pension pot target should be.

To underline this, it’s worth remembering that you are very unlikely to encounter a retiree that thinks they have too much income. Besides, even if they do, the costs of long-term care can be crippling, so having more than you need is no bad thing.

It is also worth bearing in mind that this rule of thumb is just a guide, and the actual amount you need to save will depend on several factors, including your:

Retirement income goals: If you want a larger income, you will need to accrue a larger pension pot.
Current pension and other savings: If you are ahead of the game, the less you will need to save and vice-versa.
Expected retirement age: The earlier you want to retire, the more you will have to save into your pension at an early age.
Where your pension is invested: Typically speaking, a well-diversified high-risk fund or multiple funds will provide the greatest potential for returns above inflation over the long term. It may be you need to review your investments to ensure they are aligned with your attitude to risk and your overall retirement goals.
Type of pension scheme you are contributing to: There are different rules for personal pensions, auto-enrolment pensions, occupational workplace schemes, stakeholder schemes and defined benefit / final salary schemes.

Conclusion.

There is no one-size-fits-all answer to the question of how much one should pay into their pension pots in their 50s. However, some general rules of thumb can help guide your decision-making process and one of the easiest yardsticks is to pay at least half of your age as a percentage of your salary into your pension.

It's also important to regularly review your pension contributions and adjust them as needed. As your income or retirement goals change, you may need to increase or decrease the amount you're saving into your pension pots.

Don’t forget, it’s also worth reading our article “How much should I have in my pension savings pots at 50” to better understand where your pension savings should be by now and what steps you can take to increase your pension pot.

What’s next?

If you want to bring yourself up to speed on the topic of pensions, a great place to start is this index of pension articles we’ve published on the subject. If you need help or advice on your personal or business finances or if you want to consider investing to make your money work harder, you can get in touch with one of our advisors for independent financial advice. We offer a free initial consultation and although we are based in Tunbridge Wells, we advise clients across the UK.

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Don’t forget, this article offers general financial information and should not be taken as personal advice. Remember that investments and pensions can go up and down in value, so you could get back less than you put in. Tax rules can change and the benefits depend on individual circumstances.

How much should I pay into my pension pots in my 50s?