Salary Sacrifice Pension Calculator
See how much you and your employees save on tax and National Insurance with pension salary sacrifice. Updated for the 2026/27 tax year.
Employee details
Salary sacrifice savings
| Current (RAS) | With sacrifice | Difference | |
|---|---|---|---|
| Gross salary | £35,000 | £33,562 | |
| Income tax * | £4,486 | £4,198 | Already received |
| Employee NI | £1,794 | £1,679 | £115 |
| Pension deducted from pay | £1,150 | £0 | |
| Take-home pay | £27,569 | £27,684 | +£115 |
| Into your pension pot | £1,438 | £1,438 | No change |
* Under relief at source your payslip deduction is £1150.40 and your provider claims the remaining £287.60 from HMRC, so £1,438 reaches your pension pot either way. With salary sacrifice the full amount goes in through your employer instead. The new saving from switching is the £115 National Insurance reduction.
Company savings
Model how salary sacrifice savings could work across your team. Choose how much to reinvest in benefits.
Based on an average salary of £35,000 with 5% employee contribution on qualifying earnings. Actual savings will vary by individual salary and contribution level.
Build your benefits package
Select benefits to see what your £5,392/year budget could fund. You could also add some or all of this to employee pensions instead.
PerkIQ is not authorised or regulated by the Financial Conduct Authority. This calculator is general guidance for UK employers and employees, not financial advice. Figures are estimates based on 2026/27 tax rates and the details you enter, and your circumstances may differ. Speak to a regulated financial adviser before making decisions about your pay or pension.
How salary sacrifice works
Salary sacrifice (also called salary exchange) is an arrangement where an employee agrees to reduce their gross salary in exchange for an equivalent employer pension contribution. Because the contribution comes from gross pay, before income tax and National Insurance are calculated, both the employee and the employer make savings.
Qualifying earnings vs basic pay
The qualifying earnings method calculates pension contributions on earnings between the lower limit (currently £6,240) and the upper limit (£50,270). This is the default method for auto-enrolment. The basic pay method calculates contributions on your full salary, which typically results in higher contributions and greater savings.
Who saves what?
If your current pension uses relief at source (the most common method), your provider already claims 20% basic-rate tax relief. For basic-rate taxpayers, the new saving from salary sacrifice is the 8% NI reduction. Higher-rate taxpayers also gain extra tax relief (20% or 25% on income above the basic-rate band) that they would otherwise need to claim via self-assessment. Employers save 15% in National Insurance on every pound of salary that is sacrificed.
Does it matter which pension provider you use?
No. The saving comes from paying less income tax and National Insurance, not from the provider, so the figures are the same whether your workplace pension is with Aviva (which calls it salary exchange), Legal & General, Nest, Smart Pension or another provider. What can differ between schemes is how tax relief is applied, either relief at source or a net pay arrangement, and whether contributions are worked out on qualifying earnings or basic pay. The calculator above models the tax and National Insurance side, which is identical across providers.
What changes in April 2029?
From 6 April 2029, both employee and employer National Insurance will apply to salary sacrifice pension contributions above £2,000 per year. The first £2,000 stays free of National Insurance, and the income tax saving is unchanged, so this mainly affects higher earners and larger contributions. Our guide to the 2029 salary sacrifice changes explains who is affected and what to do.
Want to see the full picture?
Salary sacrifice is just one part of your benefits package. PerkIQ scores your entire employee benefits offering across 7 categories and shows you exactly where to improve.
Get your free benefits scoreSalary sacrifice: common questions
How much can I save with salary sacrifice?
It depends on your salary and contribution level. Basic rate employees keep the 8% National Insurance they would otherwise pay on the amount sacrificed, while higher and additional rate taxpayers can also receive their full tax relief automatically. Employers save 15% in employer National Insurance on every pound an employee sacrifices. Enter your own figures in the calculator above to see the numbers for the 2026/27 tax year.
Is salary sacrifice worth it?
For most employees it is, because the contribution comes out of gross pay before tax and National Insurance are calculated, so take-home pay falls by less than the amount going into the pension. The main things to check are that pay does not drop below the National Minimum Wage, and that a lower headline salary will not affect things like mortgage borrowing or salary-linked benefits.
Does salary sacrifice affect a mortgage application?
It can. Salary sacrifice reduces your gross salary on paper, and many lenders assess affordability on that lower figure. Some lenders will use your pre-sacrifice salary if you provide evidence of the arrangement, so it is worth checking with your broker or lender before you apply.
Does salary sacrifice reduce my State Pension or statutory pay?
As long as your earnings stay above the lower earnings limit, paying less National Insurance through salary sacrifice does not reduce your State Pension entitlement. It can affect earnings-related statutory payments such as maternity pay, which is why many employers calculate those on your pre-sacrifice salary to protect you.
What is changing with salary sacrifice in 2029?
From 6 April 2029, both employee and employer National Insurance will apply to salary sacrifice pension contributions above £2,000 per year. This reduces the National Insurance advantage on larger contributions, but the income tax saving stays the same and the first £2,000 a year is unaffected. The change applies to pensions only, not to electric car or cycle to work schemes.
Does this calculator work for Aviva, Legal & General, Nest and other schemes?
Yes, it works for any UK workplace pension. Salary sacrifice is called salary exchange by Aviva and some other providers, but it is the same arrangement, and the tax and National Insurance figures the calculator shows apply whichever provider runs your scheme, from Aviva and Legal & General to Nest and Smart Pension.
Can any employer offer salary sacrifice?
Yes. There is no minimum company size, and schemes can be set up to be low cost and low admin. The one firm rule is that salary sacrifice must not reduce an employee's cash pay below the National Minimum Wage, which is why the calculator flags any salary that would breach it.
