What is the annual pension allowance?

The annual allowance is £60,000 for most people in the 2026/27 tax year. Total contributions (yours plus your employer's) above that are taxed. Those earning over £260,000 a year may have a tapered allowance.

How does pension tax relief work?

Workplace pension schemes get tax relief automatically. Net pay schemes deduct contributions before tax; salary sacrifice gives up salary entirely; and 'relief at source' schemes have HMRC add basic-rate relief, with higher-rate relief claimed through your tax return.

Pension contribution calculator

See how a pension contribution is really priced: what it costs you each month, and how much goes into your pot when employer contributions and tax relief are added.

Your details

Tax yearNationGross annual salary

Pension methodYour contribution %

Employer contribution %

Of salary, on top

£1,800

Your monthly costTake-home reduction

£4,000

Into the pot per yearYou + employer + relief

£1,500

Employer pays inOn top of your salary

£4,000

Bang for your pound£2.22 in pot per £1 you give up

Where the pension money comes from

Source	Annual
Your contribution (out of take-home)	£2,500
Your employer's contribution	£1,500
Total added to your pension pot	£4,000

Salary sacrifice and net pay only add employer contributions if your scheme matches; the figures above use your employer % regardless. Relief at source adds basic-rate tax relief backed by HMRC, so higher-rate earners reclaim the extra 20–25% via self assessment.

Uses 2026-27 HMRC rates. Annual pension allowance is £60,000. Contributions above that may incur tax. No investment growth is shown; this calculator covers contributions, not future value.

Why contributions beat take-home

Because of tax relief and employer matching, pension contributions are almost always worth more than the take-home pay you give up. At basic rate the government effectively adds 20%, and employers commonly add another 3% or more, so your £100 can buy £150+ of pension before any investment growth.

Above £50,270 salary sacrifice saves even more since you'd otherwise pay 40% on that income. The one thing to watch is the £60,000 annual allowance, which you're only likely to hit at high multiples of the offers above.