The real cost of a pension contribution 2026/27
Pension tax relief is usually described as 20% or 40%. For anyone earning between £100,000 and £125,140, or claiming Child Benefit on an income over £60,000, it can be far more. Enter your income and the amount you're thinking of paying in, and this shows what the contribution costs you once every saving is counted.
What does a pension contribution really cost?
The headline is 20% or 40% tax relief. For a lot of people the real figure is higher, and this shows where the extra comes from.
Salary, bonus and other taxable earnings before any pension contribution.
The gross amount: the figure that ends up in your pension, including any basic-rate relief the provider adds.
A personal pension or SIPP. You pay 80%, the provider adds 20%, and you claim anything further from HMRC.
Only matters if your income is between £60,000 and £80,000, where Child Benefit is clawed back.
For guidance only. This is not financial or tax advice. It uses 2026/27 rules for England, Wales and Northern Ireland, treats all income as earnings, and assumes you are the higher earner for the Child Benefit charge. Scottish taxpayers pay different rates.
If reading this raised a question about your own situation, get in touch.
Who this calculator is for
Higher earners close to £100,000, parents whose income has drifted above £60,000, anyone deciding between a personal contribution and salary sacrifice, and people weighing up a lump sum before the tax year ends.
The 2026/27 rules it uses
- 2026/27 income tax bands for England, Wales and Northern Ireland.
- Personal allowance withdrawn at £1 for every £2 of adjusted net income above £100,000.
- High Income Child Benefit Charge of 1% of Child Benefit for every £200 of adjusted net income above £60,000.
- Employee National Insurance of 8% up to £50,270 and 2% above, saved only through salary sacrifice.
- Relief at source: 20% added by the provider, with higher-rate relief claimed from HMRC.
Frequently asked questions
How can pension tax relief be 60%?
Between £100,000 and £125,140 you lose £1 of personal allowance for every £2 of income. Each extra £100 is taxed at 40%, and it also drags another £50 into tax at 40%, so you lose £60 in total. A pension contribution reverses that: it brings your adjusted net income down and gives the allowance back.
Does a pension contribution reduce the Child Benefit charge?
Yes. The charge is based on adjusted net income, and pension contributions reduce it whichever way they're paid. Getting to £60,000 or below removes the charge completely.
Is salary sacrifice better than paying in myself?
Usually, because you save National Insurance as well as income tax, and some employers add their own saving too. It does lower your contractual salary, which can affect mortgage applications and some benefits. From April 2029 the National Insurance saving is limited to the first £2,000 a year.
Do I have to claim higher-rate relief?
If you pay into a personal pension from your bank account, yes. The provider adds 20% automatically. Anything above that has to be claimed from HMRC, through a tax return or by contacting them.
Educational estimate, not financial or tax advice. Money in a pension can't normally be accessed until age 55, rising to 57 in April 2028. Speak to a regulated adviser before making a large contribution.