Salary Sacrifice Pension: Is It Worth It?
Salary sacrifice saves 12% NI on top of your normal pension tax relief — £100 into your pension costs as little as £68 take-home.
Salary sacrifice means giving up part of your salary in exchange for a higher pension contribution from your employer. You pay no income tax and no National Insurance on the sacrificed portion.
The maths
A basic-rate earner sacrificing £100 of gross pay saves £20 tax + £8 NI = £28 take-home, so £100 into the pension costs £72. A higher-rate earner saves £40 + £2 NI = £42, costing £58 take-home.
The £100,000 sweet spot
Between £100k and £125,140 you lose £1 of personal allowance for every £2 over £100k — an effective 60% marginal rate. Salary-sacrificing the excess saves the full 60% plus 2% NI.
See exactly what lands in your bank account each month after income tax, National Insurance, pension and student loan deductions.
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