Are you making the most of your workplace pension?

The amount employers are contributing to workplace pensions has risen significantly in the past decade, according to a new report by the Institute for Fiscal Studies (IFS).

However, there are still concerns that millions of people aren't saving enough for retirement.

Here, we explain how to get the most out of your workplace pension.

How much do employers contribute to pensions?

Among all private sector employees, average employer contributions fell from 4.2% of total earnings in 2005 to a low of 3.4% in 2012, according to the IFS. 

But this downward trend was reversed thanks to the introduction of automatic enrolment in 2012, which means employers have to automatically enrol eligible employees into a workplace pension and contribute a minimum of 3% of workers’ salary.

By 2024, average employer contributions had reached 5.1%.

However, higher earners are much more likely to receive higher employer contributions: in 2024, 46% of those in the highest quarter of the earnings distribution received employer contributions of at least 6% of gross pay, compared with 22% of the lowest quarter of earners.

Auto enrolment has also significantly increased the number of people who are saving into a pension. Overall workplace pension participation among eligible private sector employees rose from just over 40% in 2012 to 89% in 2024.

• Find out more: workplace pensions explained

How workplace pension rules could change in future

In spite of some positive trends, there are still concerns that current levels of pension contributions are not enough. 

The interim report from the government's Pension Commission suggests that 15 million working-age people are undersaving for retirement. The Commission is now considering policies to increase pension saving and will report back in early 2027. 

These could include increasing minimum contributions from both employees and employers, as well as lowering the minimum age for enrolment from 22 to 18 and removing the lower earnings limit (currently £6,240) so that contributions are calculated from the first pound earned. 

The IFS report points out that higher contributions would mean lower take-home pay, higher employer costs and particular pressures on low earners and sectors such as accommodation and food services, where more employees are on minimum wage.

• Find out more: how much will I need to retire?

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Three ways to boost your workplace pension

Future legislation may see employers and employees having to put more into pensions, but there are things you can do in the meantime to strengthen your retirement savings:

1. Take advantage of matched contributions

The minimum employer pension contribution is set at 3% of qualifying pay, but many employers pay a higher rate.

Some also offer matched contributions, where they'll pay more into your workplace pension if you agree to increase contributions too. 

Where it’s an option, there’s usually a limit to the percentage that an employer will match. Check with your HR department to see what your employer offers.

• Find out more: how small increases in contributions can make a big difference

2. Consider salary sacrifice

Salary sacrifice can bolster the overall amount going into your pension. It involves giving up part of your salary in return for which your employer pays an equivalent amount into your pension.

Normally speaking, money that goes into your workplace pension is subject to both employee and employer National Insurance contributions.

But with salary sacrifice, because your salary is lower, the amount of National Insurance (and income tax) you pay is reduced, while your pension contributions remain the same. 

There is currently no limit on the amount that you can pay into your pension using salary sacrifice. From April 2029, however, the amount you can contribute to a workplace pension via salary sacrifice will be capped at £2,000 a year.

• Find out more: salary sacrifice for pensions explained

3. Get full pension tax relief

You may have to actively claim pension tax relief if you are a higher-rate taxpayer (ie you earn more than £50,270 a year, or more than £43,663 in Scotland).

Basic-rate (20%) tax relief is usually added to your pension contributions automatically. This means that if you wanted to top up your pension by £100, you'd only need to pay in £80, as the government would add £20.

Higher‑rate taxpayers are entitled to an additional 20% tax relief, while additional‑rate taxpayers can claim a further 25%. (Income tax rates differ in Scotland, and the pension tax relief you're entitled to is linked to whichever rate you pay). 

But this extra tax relief isn’t always applied automatically. It depends on how pension contributions are made.

With the ‘relief at source’ system, where your pension contributions are made from your after-tax pay, you'll need to claim the extra relief (above 20%) from HMRC, either through self-assessment or by contacting HMRC directly. 

Check with your pension provider if you're unsure which system applies to you. 

• Find out more: how tax relief works