Pension & Salary Sacrifice Calculator — UK 2026/27
Tax relief, NI savings, annual allowance, and your projected retirement pot — AI-explained.
Important: This calculator provides educational information only and does not constitute financial advice. Pension planning is a complex, regulated activity. Please consult an FCA-regulated independent financial adviser before making pension decisions.
£
£2,000/yr
£1,200/yr
£
Conservative (1%)Aggressive (10%)
✦ AI Insights
Get a plain-English explanation of your result — what's driving the numbers and what to consider next.
AI-generated explanation · Not regulated financial advice
Speak to an FCA-regulated pension adviser
For personalised pension planning — salary sacrifice optimisation, drawdown, or consolidating multiple pots — a regulated IFA can provide regulated advice tailored to your situation.
Pension tax relief & salary sacrifice — UK guide (2026/27)
Pension contributions are one of the most tax-efficient forms of saving in the UK. The government adds income tax relief at your marginal rate — meaning the effective cost of pension saving is significantly lower than the nominal contribution. Salary sacrifice takes this further by also saving National Insurance. This guide explains how the mechanics work and what the annual allowance means for higher earners.
Relief at source vs salary sacrifice
Under relief-at-source, you contribute from your net (post-tax) pay and the pension provider claims 20% basic-rate relief from HMRC. Higher-rate and additional-rate taxpayers reclaim the extra relief through their Self Assessment return. Under salary sacrifice, your gross salary is reduced by the contribution amount before tax is calculated — so both Income Tax and National Insurance are saved. Salary sacrifice typically requires the employer’s agreement and a formal variation to your contract.
The annual allowance and carry-forward
The annual allowance for 2026/27 is £60,000 (or 100% of your earnings, whichever is lower). This includes both employee and employer contributions across all pension schemes. If you exceed the annual allowance, you pay a tax charge on the excess at your marginal rate. However, if you have unused annual allowance from the three previous tax years, you can carry it forward — useful for those who want to make a large one-off contribution.
This calculator is for educational purposes only. It does not constitute financial advice. Reviewed by Richard Walsh, FCA IFA.
Frequently Asked Questions
How does pension tax relief work?
Pension contributions receive income tax relief at your marginal rate. Under relief-at-source, you contribute from net pay and the pension provider claims basic rate relief (20%) from HMRC — adding 25% to what you paid in (£80 from you + £20 from HMRC = £100 in the pension). If you're a higher-rate taxpayer, you can claim the additional 20% through Self Assessment. Under salary sacrifice, contributions are made before tax, so the full marginal rate saving happens automatically.
What is the pension annual allowance for 2026/27?
The annual allowance — the maximum you can contribute to pensions and receive tax relief — is £60,000 for 2026/27, or 100% of your earnings if lower. This includes both employee and employer contributions across all your pension schemes. Those with income above £260,000 may face a tapered annual allowance, potentially reducing it to a minimum of £10,000. Unused allowance can be carried forward for up to three years.
What is salary sacrifice and how does it save NI?
Salary sacrifice (also called salary exchange) means you give up part of your gross salary in exchange for an equivalent employer pension contribution. Because the contribution comes from your pre-tax salary, you pay less National Insurance as well as less Income Tax. Employees save NI at 8% (or 2% above the upper earnings limit). Employers save 13.8% NI, and some employers pass part of this saving to employees as extra pension contributions.
What is the 4% drawdown rule?
The 4% rule is a widely-used guideline suggesting that withdrawing 4% of your pension pot in the first year of retirement, then adjusting for inflation annually, provides a high probability of the pot lasting 30 years. For example, a £300,000 pot would produce £12,000/year. It is not a guarantee — it is based on historical market returns and is sensitive to market conditions in the first years of retirement. Professional advice should be sought before drawing down your pension.
When can I access my pension?
The minimum pension access age is 57 from April 2028 (currently 55). The State Pension age is currently 66, rising to 67 between 2026 and 2028, and 68 between 2044 and 2046 under current legislation. You can take up to 25% of your pension pot as a tax-free lump sum (up to a maximum of £268,275 lifetime). The rest is taxed as income when you draw it. Some older pension schemes have protected early access at 50.
How accurate is the projection?
The retirement pot projection uses a compound growth model with your chosen assumed annual growth rate. The default 5% is a commonly used real-return assumption (after inflation) for a balanced fund. Actual returns vary significantly year to year and cannot be predicted. The projection does not account for fund charges (typically 0.1–1% per year), inflation, or changes in contribution level. Treat it as illustrative. A regulated IFA can produce a full cash-flow forecast.
Should I prioritise pension or ISA?
This is a common question with no single right answer. Pensions provide upfront tax relief (20–45%) but withdrawals are taxed. ISAs have no upfront relief but withdrawals are entirely tax-free. Higher-rate taxpayers often benefit more from pensions. If you're a basic-rate taxpayer who may retire as a non-taxpayer, the ISA wrapper can be more efficient in the long run. A regulated IFA can model both scenarios for your specific situation. CalcAI cannot advise which is right for you.