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Start with your payslip

Your payslip is more than a record of what landed in your bank account. It is the first place to check that your workplace pension is working as it should. Look for the pension deduction line — it might be called “pension”, “retirement plan” or something similar. Then find the employer contribution. Many payslips show your contribution, your employer’s contribution, and the total going into your pot each month. If you cannot see the employer part, ask your payroll team or HR for a breakdown. It is your money, and you are entitled to know exactly what is being added.

While you are there, check the pension scheme name and your member number. Keep a note of them somewhere safe. If you change jobs, you will need those details to trace old pots. A quick five-minute check now can save a lot of detective work later.

How workplace pensions are built up

Most UK employees are automatically enrolled into a workplace pension. Under current rules, the minimum total contribution is 8% of your qualifying earnings. That 8% is split between you and your employer. Your employer must pay at least 3%, and you pay the remaining 5%. Some employers are more generous, and some pay contributions on your full salary rather than just qualifying earnings. Qualifying earnings for the 2024/25 tax year are between £6,240 and £50,270. That means earnings below £6,240 and above £50,270 are not counted for the minimum calculation, though your scheme may use a different definition.

You can usually choose to contribute more than the minimum. Anything you pay gets tax relief at your marginal rate. For a basic-rate taxpayer, a £100 pension contribution effectively costs £80. Higher-rate and additional-rate taxpayers can claim extra relief through self-assessment. There is also an annual allowance — currently £60,000 — which is the most you can pay into all your pensions each year with tax relief. If you have unused allowance from the previous three years, you may be able to carry it forward.

What your employer puts in

Your employer’s contribution is a genuine pay rise that you do not see in your monthly take-home pay. It is added directly to your pension pot. Many employers match your contributions up to a certain level. For example, they might pay 5% if you pay 5%, or 8% if you pay 4%. Always find out whether your employer offers matching. If they do, paying enough to get the full match is one of the most effective ways to boost your retirement savings. Turning down free employer money is like refusing part of your salary.

• Check the match: Ask HR for your scheme’s contribution rules. Even a 1% extra from you could unlock another 1% from them.
• Salary sacrifice: Some employers offer this. You give up part of your salary, and they pay it into your pension. You save National Insurance, and so does your employer. They may pass on some of their saving too.
• Opting out: You can leave the scheme, but you will lose the employer contribution and the tax relief. If you opt back in later, you may not get the missed contributions back.

Increasing your contribution without feeling it

You do not have to jump from 5% to 15% overnight. Small, steady increases work well. When you get a pay rise, consider putting half of it into your pension before it reaches your bank account. You will not miss what you never had. If your budget is tight, try adding just 1% now. On a £30,000 salary, 1% is about £25 a month before tax relief — nearer £20 from your take-home pay for a basic-rate taxpayer.

• Round up: If your contribution is 5.2%, round it to 6%. Small changes add up over decades.
• Use windfalls: A bonus, inheritance or tax refund can be a one-off pension top-up.
• Review annually: Set a reminder each April to check your contribution rate against your budget.

Remember that money in a pension is usually locked away until you are 55 (rising to 57 in 2028). So only contribute what you can afford to leave invested. But for long-term savings, the tax relief and employer contribution are hard to beat.

Pensions and simple bookkeeping for small businesses

If you run a limited company, you can make employer pension contributions for yourself and your employees. These are usually treated as a business expense, so they reduce your corporation tax bill. That makes them a tax-efficient way to extract profit from the company. You do not pay National Insurance on employer pension contributions, and they are not limited by the usual dividend or salary rules. Keep a clear record of each contribution — date, amount, and who it was for. Your accountant will need those details.

For sole traders, there is no employer contribution, but you can still open a personal pension or SIPP and get tax relief. Good bookkeeping makes this easier. Separate your business and personal bank accounts. Set aside a percentage of every payment you receive for tax and pension contributions. A simple spreadsheet or cloud accounting software will help you see what you can afford. Do not leave it until January — little and often is kinder to your cash flow.

Checking in each year

Once a year, take fifteen minutes to review your pension. Check your annual statement. Confirm your employer has been paying in what they should. Look at the fees — even a small difference in charges can add up over twenty years. If you have old workplace pensions from previous jobs, consider whether consolidating them makes sense for you. It is not always the right move, especially if old schemes have valuable benefits, but it is worth knowing what you have.

Finally, talk about it. Ask your partner, a trusted friend, or an independent financial adviser if you are unsure. Pensions can feel dull, but they are simply deferred pay. Understanding yours is one of the most practical money skills you can build. Start with your payslip this month, and take it from there.