Model auto-enrolment, salary sacrifice and a custom contribution side-by-side. See your gross pension, the employer top-up, tax and NI relief, and the real net cost to your pay packet.
Total into pension (annual)
£3,101
Employee + employer (incl. tax relief where applicable)
Net cost to you
£1,395
Real reduction in take-home
Effective boost
2.22×
Pension pot per £1 of net cost
| Contribution base | £38,760 |
| Employee contribution (5%) | £1,938.00 |
| Employer contribution (3%) | £1,162.80 |
| Income tax saved | £387.60 |
| Employee NI saved | £155.04 |
| Total into pension | £3,100.80 |
| Net cost to your take-home | £1,395.36 |
Auto-enrolment and Custom modes assume relief-at-source (RAS). If your scheme is a net-pay arrangement, your real net cost is the same as salary sacrifice for income tax (but not NI). Salary sacrifice mode assumes both income tax and NI are saved on the contribution; some employers also share their own NI saving: model that by adjusting the employer % upward. The annual allowance (£60,000), tapered annual allowance, MPAA (£10,000) and lifetime allowance abolition are not modelled. This calculator does not constitute financial advice: see a qualified adviser before changing pension contributions.
UK workplace pensions are governed by the auto-enrolment regime, which sets minimum contribution levels and a banded definition of “qualifying earnings.” The exact mechanics vary depending on whether your employer uses a net-pay scheme, a relief-at-source scheme, or salary sacrifice: but the underlying tax relief is the same for most basic-rate taxpayers.
For a basic-rate taxpayer, a £100 contribution under net-pay or relief-at-source costs £80. Under salary sacrifice it costs roughly £72 because employee NI (8%) is also saved. For higher-rate taxpayers the gap narrows at the personal level: £60 under net-pay vs roughly £58 under salary sacrifice (because higher-rate NI on the relevant slice is only 2%). However, salary sacrifice still pulls ahead on the employer side: many employers share their 15% saved NI back into your pension, which can re-open the gap and beyond.
The standard annual allowance is £60,000 for 2026/27. You also benefit from carry-forward: unused allowance from the previous three years can be brought forward, provided you were a member of a registered pension scheme in those years. The allowance tapers down by £1 for every £2 of adjusted income over £260,000, to a minimum of £10,000. If you have already taken flexible benefits from a DC pension, the Money Purchase Annual Allowance (MPAA) of £10,000 applies.
Auto-enrolment is a UK law that requires most employers to enrol eligible staff (aged 22 to State Pension age, earning over £10,000) into a workplace pension. The default minimum is 8% total contribution: 5% from the employee (often net of basic-rate tax relief) and 3% from the employer, calculated on qualifying earnings (£6,240-£50,270 for 2026/27).
A salary sacrifice arrangement is where you contractually agree to lower gross pay in exchange for a higher employer pension contribution. Because the contribution comes off pre-tax pay, you save income tax and NI. Many employers also share the saving on their NI (15% from April 2025) by adding it to your pension: making salary sacrifice noticeably more efficient than relief-at-source pension contributions.
Net pay arrangement: contribution comes off gross salary before tax: you get full marginal rate relief automatically. Relief at source: contribution paid net of basic rate (20%) and the provider claims 20% from HMRC; higher and additional rate taxpayers must claim further relief through Self Assessment. Salary sacrifice is technically neither: it is a reduction in pay that the employer pays into your pension.
The annual allowance is the most you can contribute to all your pensions in a tax year and still get tax relief: £60,000 for 2026/27 (or 100% of relevant earnings if lower). It tapers down for those with adjusted income over £260,000. The Money Purchase Annual Allowance (MPAA) is £10,000 if you have already drawn flexibly from a defined-contribution pension.
For most basic-rate taxpayers, increasing pension contributions costs £80 net per £100 in the pension. For higher-rate taxpayers it is around £60 net per £100, and for those caught in the £100k-£125,140 personal-allowance-taper trap, the effective relief can exceed 60%. PayslipIQ does not give regulated advice: speak to a qualified financial adviser before making decisions about pension contributions.
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PayslipIQ provides educational information and estimated calculations only. It does not provide tax, legal, financial, payroll, accounting, pension, benefits or employment advice. Always verify your payslip, tax code, deductions and take-home pay with your employer's payroll department, HMRC, your pension provider, a qualified accountant, tax adviser or another appropriately qualified professional.