Salary Sacrifice Pension Calculator: Net Pay vs Salary Sacrifice
See how much better off you are putting money into your pension through salary sacrifice instead of a normal pension contribution.
| No pension | Net pay | Salary sacrifice | |
|---|---|---|---|
| Pension contribution a year | £0 | £2,000 | £2,000 |
| Income tax | £5,486 | £5,086 | £5,086 |
| National Insurance | £2,194 | £2,194 | £2,034 |
| Take-home pay a year | £32,320 | £30,720 | £30,880 |
| Take-home pay a month | £2,693 | £2,560 | £2,573 |
| What the pension costs you a month | £0 | £133 | £120 |
Your employer also saves about £300 a year in employer National Insurance (15%) on salary sacrificed. Some employers pass that on by paying it into your pension, which makes salary sacrifice worth more; others keep it. Salary sacrifice also lowers your pay for some purposes, such as mortgage applications, and it cannot take your pay below the National Minimum Wage.
Salary sacrifice or net pay: what is the difference?
With a net pay pension arrangement your employer takes your pension contribution out of your pay before income tax is worked out, so you get tax relief straight away, but you still pay National Insurance on the full salary.
With salary sacrifice you agree a lower salary and your employer pays the difference into your pension. Because your pay is lower, you pay less income tax and less National Insurance.
Example: on a £40,000 salary with a 5% contribution, salary sacrifice leaves you £160 a year better off than net pay (£30,880 against £30,720), and the pension gets the same £2,000.
Why the saving is the National Insurance
Income tax relief is the same in both cases. The extra saving from salary sacrifice is the employee National Insurance you do not pay on the sacrificed pay: 8% for most people, or 2% on pay above £50,270.
What your employer gets
Employers save employer National Insurance (15% above £5,000) on pay that is sacrificed. Some pass all or part of that saving into your pension, which is why it is worth asking.
Things to check before you agree
- Lower pay on paper. A lower salary can affect mortgage affordability checks and some benefits that are linked to pay, such as statutory maternity pay.
- Minimum wage. Your pay after the sacrifice cannot fall below the National Minimum Wage.
- It is changing in 2029. From April 2029 only £2,000 a year of employee pension contributions made through salary sacrifice will stay exempt from National Insurance. Contributions above that will be charged.
For the basics, read our salary sacrifice guide, or compare your own pay in the take-home pay calculator.
Sources: GOV.UK: Changes to salary sacrifice for pensions from April 2029, GOV.UK: Tax relief on pension contributions. Figures last checked on 8 October 2026.
Frequently asked questions
Is salary sacrifice better than net pay?
For you, usually yes, because you also save employee National Insurance. On a £40,000 salary with a 5% contribution the saving is about £160 a year.
Does salary sacrifice reduce my pension?
No. The same amount goes into your pension. What changes is the salary on your payslip, which is lower.
Can I get salary sacrifice at any employer?
No. It is up to your employer to offer it. Ask your payroll or HR team. Many employers offer it for workplace pensions.
What is the 2029 change to salary sacrifice?
From April 2029, employee pension contributions through salary sacrifice will only be exempt from National Insurance up to £2,000 a year. Income tax relief is not affected.
More from UK Answers
Figures are for the 2026/27 tax year from official sources and are estimates for guidance only, not financial or legal advice. Printed from ukanswers.co.uk.