Contribution rate (employee + employer)

Chart showing the combination of investment returns and contribution rates needed for a 25 year old new entrant to a pension scheme in order to meet a “moderate” and “comfortable” standard of living, based on both 2022 and 2023 living standards. It shows that for the comfortable level in 2023, an 8% contribution rate requires investment return of inflation + 7.4%, a 10% contribution rate requires inflation + 6.6% p.a., a 15% contribution rate requires inflation + 5.2% and a 20% contribution rate requires inflation + 4.1%.

Figures show the investment return needed above inflation, net of fees for a 25 year old new entrant to a Scheme.

Source: PLSA Retirement Living Standards. Mercer calculations in February 2023. Assumes pre-retirement investment return of inflation + 2.5%, phasing to inflation + 1% from 10 years and 25% cash from 3 years.