PENSION GUIDE
How pension tax benefits work
See a simple estimate of what you and your employer could contribute each year, then understand how different pension arrangements affect tax and take-home pay.
SIMPLE PENSION ESTIMATE
What could go into your workplace pension?
Start with the usual minimum automatic-enrolment rates. Adjust them only if your employer uses a different arrangement.
Your pension estimate will appear here
Enter your annual salary to see the estimated yearly contributions.
This is a simple annual illustration, not a forecast of investment growth or retirement income. The 5% employee figure may include tax relief, depending on how the scheme operates. Eligibility, pensionable pay and employer contributions can differ—check your workplace pension documents.
Salary sacrifice
You agree to reduce contractual salary and the employer pays the exchanged amount into the pension. Under current rules this commonly reduces both taxable pay and employee National Insurance. The National Insurance Contributions (Employer Pensions Contributions) Act 2026 introduced new treatment from April 2029 for employee salary-sacrifice pension contributions above £2,000 a year.
Net pay arrangement
Your contribution is taken before Income Tax is calculated, so tax relief is normally given through payroll. It usually does not reduce National Insurance pay.
Relief at source
Your contribution is taken from net pay and the pension provider normally adds basic-rate tax relief. Higher or additional-rate taxpayers may need to claim any extra relief from HMRC.
Full pay or qualifying earnings?
A contribution percentage may apply to full pensionable salary or only a band of qualifying earnings. For 2026/27, the automatic-enrolment qualifying earnings band is £6,240 to £50,270. Check your scheme documents rather than assuming the percentage applies to your whole salary.
Before increasing contributions
Check employer matching, scheme charges, access restrictions, contribution limits and how lower contractual pay could affect borrowing or salary-related benefits. Pension money is normally locked away until the permitted pension age, so keep suitable emergency savings.