Is Salary Sacrifice Pension Worth It?
Salary sacrifice can turn £100 of take-home into £140+ in your pension. Here's exactly how the maths works.
Salary sacrifice means giving up part of your salary in exchange for an equivalent employer pension contribution. Because the money never hits your payslip, you don't pay income tax OR National Insurance on it.
Worked examples
Basic rate (20% tax + 8% NI): give up £100 of gross salary. Your take-home only falls by £72. £100 lands in your pension. Net win: £28 + any employer NI saving they pass on.
Higher rate (40% + 2%): give up £100. Take-home falls by £58. £100 in pension. Net win: £42.
60% trap (£100k–£125k): give up £100. Take-home falls by £40. £100 in pension. Net win: £60 — the single best tax break in the UK system.
Things to check
Your reduced gross salary is used for mortgage applications — borrow before you sacrifice big.
Sick pay, redundancy and parental leave are sometimes calculated on reduced salary.
Sacrificing below the National Minimum Wage isn't allowed.
See exactly what lands in your bank account each month after income tax, National Insurance, pension and student loan deductions.
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