If your income is between £100,000 and £125,140, a pension contribution gets you 60% relief, because you recover the personal allowance you are losing at the same time as claiming higher rate relief. That is the best deal in UK personal tax and it exists at exactly one income band. Everywhere else, topping up is a narrower decision than most guides suggest.
The 60% band
Above £100,000 your £12,570 personal allowance is withdrawn at £1 for every £2 of income, which is why it disappears entirely at £125,140 (2026/27). Income inside that band therefore carries 40% tax on itself plus another 20 percentage points of tax on the allowance it destroys.
A contribution that brings you back under £100,000 unwinds both.
You earn £108,400 and sacrifice £8,400 through your employer's scheme:
| Income tax saved on the £8,400 sacrificed | £3,360 |
|---|---|
| Income tax saved on the £4,200 of personal allowance restored | £1,680 |
| Employee National Insurance saved at 2% | £168 |
| Net cost to you | £3,192 |
| Amount in the pension | £8,400 |
That is 2.63 times your money before any growth, and it is the only place in the tax system where the arithmetic looks like that. If your income sits in this band and you are not using it, nothing else in this article matters as much.
Additional voluntary contributions
AVCs are extra payments on top of your regular workplace contributions, usually arranged by raising your contribution percentage through payroll. Relief arrives through the same mechanism as your normal contributions, so there is nothing to claim.
Two things worth checking before you use them. If your employer matches above the minimum, an AVC may trigger more employer money, which is worth more than the relief. And if your scheme has a short fund list or high charges, you can contribute to a SIPP instead and get identical tax treatment with a wider choice.
Some public sector employers offer a shared cost AVC, where the employer contributes toward the cost of your AVC. If yours does, use it. That is an employer subsidy on top of relief and it is rare.
Salary sacrifice, with the National Insurance actually worked out
Salary sacrifice adds a National Insurance saving on top of income tax relief. The size of that saving is routinely overstated, including in the previous version of this page.
Employee National Insurance in 2026/27 is 8% on earnings between £12,570 and £50,270, and 2% above £50,270. A higher rate taxpayer is by definition above £50,270, so their marginal NI is 2%.
On a £1,000 contribution:
| Route | Basic rate | Higher rate |
|---|---|---|
| Relief at source, net cost | £800 | £600 |
| Salary sacrifice, net cost | £720 | £580 |
| Sacrifice advantage | £80 | £20 |
The advantage for a basic rate earner is four times the advantage for a higher rate earner, which is the reverse of how salary sacrifice is usually pitched. It is still worth using at any income, partly because relief is immediate rather than reclaimed a year later, and partly because some employers pass back part of their own 15% employer NI saving as an extra contribution. Ask whether yours does. That is worth more than the employee saving at every income level.
The annual allowance
You can contribute £60,000 across all schemes in 2026/27 and still get relief, counting your contributions, your employer's and any personal ones together. Separately, relief on your own contributions is capped at 100% of your relevant UK earnings, or £3,600 if you have little or none.
For most people neither limit binds. On a £40,000 salary with 5% employee and 5% employer contributions, £4,000 goes in and £56,000 of allowance goes unused.
Unused allowance from the previous three tax years can be carried forward, which matters after a bonus, a business sale or an inheritance. The mechanics and the reason the headline figure is misleading are in SIPP carry forward.
Pension or ISA
The standard answer is that pensions win on tax. That is true, and the margin is smaller than the framing implies.
Take a basic rate taxpayer who will also be a basic rate taxpayer in retirement. £1,000 gross into a pension costs £800. On withdrawal, a quarter is tax free and three quarters is taxed at 20%, so £1,000 of pot delivers £850 of spendable money. The same £800 into an ISA delivers £800. The pension wins by 6.25%, before any employer contribution.
6.25% is worth having and it is not the reason to choose a pension. The reasons are the employer match, which can be worth 100%, and the National Insurance saving through sacrifice. Strip both out, and for someone who might need the money before 57, we would take the ISA. That is a more sceptical position than most pension content will offer and reasonable people weight the access constraint differently.
For a higher rate taxpayer expecting basic rate in retirement, the gap is wide enough that the argument does not need making.
Access is the real constraint either way. Pension money is locked until the normal minimum pension age, currently 55 and rising to 57 in 2028. ISA money is available immediately.
A workable order for most people: take the full employer match, then use the 60% band if you are in it, then fill the ISA allowance of £20,000 (2026/27) for money you might need, then top up the pension with what is left.
For how relief reaches you, see pension tax relief explained. To model either side, use the pension calculator and the ISA calculator.
Rates: GOV.UK, rates and thresholds for employers 2026 to 2027 and tax on your private pension contributions. This page explains the rules and is not personal advice.
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