The same 5% can cost you three different amounts

You put 5% into your pension. Someone else at another company puts in 5%. The same money goes into both pots — and one of you has more left in your account at the end of the month.

There are three ways an employer can run pension contributions, and they take the money at three different points. Which one you're on changes your take-home pay, and almost nobody knows which one they're on.

Your pension comes out of your pay at one of three moments

Before everything, before some things, or after everything.

The three have unhelpful names, and they are the names your payroll department will use, so they are worth knowing.

Salary sacrifice. You formally give up part of your salary, and your employer pays it into your pension instead. Your gross pay genuinely goes down. Everything worked out from your gross pay goes down with it.

Net pay arrangement. Your contribution comes out of your pay before income tax is worked out, so you get income tax relief straight away, at whatever rate you pay. National Insurance is worked out on your pay before the pension comes off.

Relief at source. Your contribution comes out of your pay after everything has been deducted. Your pension provider then claims basic-rate tax back from HMRC and adds it to your pot.

Salary sacrifice is the only one that changes your National Insurance

The other two are income tax arrangements. This one moves your gross pay itself.

Under a net pay arrangement or relief at source, your National Insurance is worked out on your full pay, before any pension money has moved. HMRC's own guidance is blunt about it: contributions to a pension are not deducted before National Insurance is worked out, and there is no National Insurance relief to be had.

Salary sacrifice is different in kind, not degree. You are not paying money out of your salary — you have agreed to a smaller salary. There is less pay to charge National Insurance on, so there is less National Insurance.

And that is why salary sacrifice also shrinks your student loan repayment

Your student loan is worked out on the same pay figure as your National Insurance. Move one and you move the other.

This is the part that surprises people, and it is worth spelling out because no calculator I have looked at mentions it.

Your student loan deduction is not worked out on some figure of its own. HMRC defines the pay it comes off as the pay that National Insurance is charged on — the same number, by definition rather than by coincidence. So anything that reduces your National Insurance pay reduces the pay your student loan is judged against too.

Salary sacrifice reduces it. Net pay and relief at source don't.

So two people on the same salary, both repaying the same student loan plan, both putting the same percentage into a pension, can have different student loan deductions — because of an administrative choice their employers made that neither of them was asked about.

The calculator shows you this. Put your pension in, switch the arrangement, and watch the student loan line move or stay still.

Under relief at source, the top-up goes into your pension, not into your pay

It is real money and it is yours. It just never touches your bank account.

Relief at source is the one most likely to be misread. Your provider claims basic-rate tax back from HMRC on what you paid in — but that money is credited to your pension scheme. It does not appear in your take-home pay, it does not turn up as a refund, and your payslip will not show it.

So under relief at source, the amount leaving your pay is smaller than the amount arriving in your pension. Both numbers are correct. They are just answers to different questions.

If you pay higher-rate tax under relief at source, some of your relief is sitting unclaimed

Your provider only ever claims the basic rate. The rest is yours to ask for.

This is the one worth acting on. Under relief at source your pension provider reclaims tax at the basic rate and no more. If you pay tax at a higher rate, you are entitled to more relief than that — but it does not come through your payroll, and nobody sends it to you.

You claim it from HMRC yourself, through a tax return or by contacting them. Under a net pay arrangement this never arises, because the relief was given at your own rate when the contribution came off.

I cannot show this in your take-home figure, because it genuinely is not in your take-home pay. That is exactly why it is worth saying out loud.

How to find out which one you're on

It takes about a minute, and there are three places to look.

Your payslip. Look for the pension line. Under a net pay arrangement or relief at source, you will see a pension deduction listed with the others. Under salary sacrifice you often will not see a deduction at all — instead your gross pay is already lower than your salary divided by twelve, and there may be a separate line showing what your employer paid in.

Your pension provider's website or app. Scheme documents usually name the arrangement directly, often in the joining paperwork.

Ask payroll or HR. This is the reliable one. "Is our pension salary sacrifice, net pay, or relief at source?" is a question they answer all the time, and it is not a strange thing to ask.

If you genuinely can't find out, tell the calculator so. It will leave the pension out and say it has, rather than picking one for you and quietly being wrong by a different amount in each direction.

"5%" might not mean 5% of everything

Some schemes apply your percentage to a band of your pay, not to all of it.

There is a second thing that makes two identical-looking contributions different amounts of money. Some workplace schemes apply your percentage to your whole pay. Others apply it to a narrower band called qualifying earnings: for 2026/27 that band is the pay between £6,240 and £50,270. Everything you earn below £6,240 is left out, and so is everything above £50,270.

On a £35,000 salary, 5% of all your pay is £1,750 a year. 5% of qualifying earnings is £1,438 a year. Same salary, same "5%", and £312 apart — going into your pension in one case and not in the other.

How to tell which one you're on. Take the pension deduction from your payslip and divide it by your gross pay for the same period. If you've been told 5% and the answer is visibly less than 5%, your scheme is probably using qualifying earnings. Payroll will confirm it, and the scheme documents usually name it outright.

Which is more likely. Larger employers commonly apply the percentage to all your pay, or to basic pay excluding overtime and bonus. Qualifying earnings turns up most often in schemes built to meet the automatic-enrolment minimum and no more. That's why the calculator's own setting starts on all pay: it's the commoner answer, not a guess dressed up as one.

One change is coming, and it probably isn't yours to worry about

From April 2029, salary sacrifice into a pension stops being National Insurance-free above £2,000 a year.

This is already legislated, so it is worth knowing about rather than being surprised by. From April 2029, only the first £2,000 of pension contributions made through salary sacrifice each year will be exempt from National Insurance. Above that, both you and your employer pay National Insurance on the rest, as you would under any other arrangement.

Income tax relief is not affected at all.

Whether it matters to you depends on how much you put in through salary sacrifice. If your contributions are under £2,000 a year, nothing about this changes for you — and most people in their thirties contributing a normal percentage of a normal salary are under it. If you contribute more than that through salary sacrifice, some of the National Insurance advantage described further up this page goes away in 2029.

It changes nothing about the 2026/27 figures this calculator gives you, and the calculator does not apply it.

Source: HM Treasury and HMRC, "Changes to salary sacrifice for pensions from April 2029", published 26 November 2025.

Where this breaks down

A few things this page and the calculator don't cover.

I assume your pension comes off your regular pay. If you are also sacrificing a bonus, or your scheme takes a percentage of your bonus as well, the figures will be lower than I show.

I assume one pension, one employer and one job. Two jobs is out of scope for this calculator entirely.

I don't check any of the annual limits on what you can put into a pension with tax relief. If you are contributing a large amount, those limits exist and this calculator does not know about them.

And I don't tell you what to contribute, or which arrangement is better for you. Salary sacrifice leaves more in your pocket today for the same money in your pension, which is a fact rather than a recommendation — it can interact with other things in your life, and it's your employer's choice to offer it, not yours to pick.

I can't tell you what to do about your own pay. I don't know your situation, and this is information rather than advice.