What it costs
You pay contributions into the Scheme every time you’re paid, and so does the Company. You pay 5% of your capped pensionable salary, while the Company pays the rest that’s needed to meet the cost of providing your benefits when you retire.
You and the Company both contribute to your pension.
You pay 5% of your capped salary.
The Company pays the rest, however much is needed.
It costs less than you think
You get tax relief on your pension contributions, which means you don’t pay income tax on them, so your take-home pay isn’t reduced by as much as you think.
You can pay your contributions using salary sacrifice and make savings on National Insurance too. Your salary is reduced by an amount equivalent to your pension contributions, so you pay tax and National Insurance on a lower amount. In return, the Company pays your contributions on your behalf.
How salary sacrifice works out
Max earns £24,000 a year. The table shows Max’s monthly income when paying pension contributions without salary sacrifice and with salary sacrifice.
| Without salary sacrifice | With salary sacrifice | |
| Max’s monthly capped pensionable salary | £2,000.00 | £1,900.00 |
| Income tax | £170.50 | £170.50 |
| National Insurance | £76.20 | £68.20 |
| 5% pension contribution | £100.00 | £100.00 |
| Take-home pay | £1,653.30 | £1,661.30 |
Based on figures for the 2024/2025 tax year.
Max is £8 a month better off with salary sacrifice – over a year, this is a saving of £96.
Notes:
Salary sacrifice isn’t right for everyone, for example if your earnings would be lower than the National Living Wage or you’re over State pension age. You can opt out of using salary sacrifice.
You can still use your gross salary (before salary sacrifice) when applying for a mortgage or other financial products.
TAX ALLOWANCES
A pension is one of the most tax-efficient ways to save, but there are some limits on how much you can pay in each year.
Annual Allowance
Your Annual Allowance (AA) is the most you can save into your pension in a tax year (6 April to 5 April) before you have to pay tax. For most people, the standard AA is £60,000. If you exceed the AA, we’ll send you a Pension Savings Statement in October.
If you’ve flexibly accessed any defined contribution pension savings but continue to pay into a defined contribution pension arrangement (such as Money Purchase AVCs), the Money Purchase Annual Allowance will apply to you, which is £10,000. (Your AA for your defined benefit pension savings would then be £50,000.)
If you’re a high earner, with an annual income over £200,000, the Tapered Annual Allowance (TAA) may affect you. If you have an adjusted income above £260,000 a year, your AA will be reduced and could be as low as £10,000.
Please see the government website for further information about these annual allowances.
Lifetime Allowance
The Lifetime Allowance (LTA) was a limit placed on the amount of pension savings you could build up from all workplace and private pensions before paying a tax charge. In April 2024, the LTA was abolished.