There’s a rule of thumb in pensions that says if you take your age when start paying into a pension and halve it, that’s the percentage rate you need to be contributing. 

So, if you start paying into a pension when you’re age 24, you need to be contributing 12% of your salary. If you don’t start pension saving until you’re age 40, you’ll need to be contributing 20%. Generally speaking, the earlier you start, the better. 

Don’t forget, when you pay into a workplace pension, like the Plan, you pay contributions and so does your employer – so that ideal percentage contribution rate doesn’t all have to come from you. In the Plan, if you pay 7%, you’ll get the maximum contribution rate of 9% from Cummins, so each month in total, you’ll be saving 16%. 

A helpful tool is the pension planner. You can use it to find out if there are any gaps between your contributions and the amount you might need for retirement (as we looked at in part 1 of this series). 

You’ll find the pension planner by logging in to your account via Manage my pension: Select ‘View my pension’ and go to ‘Planner’. Using the red boxes, you can model what impact any changes you make could have. 

What this means for you 
Once you’ve worked out if you might have any retirement income gaps – what can you do about them? 

Look out next month for Part 3: How to close any income gaps