Take-home pay calculator: what a pension really costs you

Put £100 into a pension and your take-home pay usually falls by much less than £100, because the tax and National Insurance you’d have paid go into the pension instead. See how much for your salary, and how the three ways of paying in compare.

On a £120,000 salary, putting £20,000 a year into a SIPP costs you just £8,000 of take-home pay. The other £12,000 is income tax you’d otherwise pay.

Costs you£8,000a year, £667 a month

Goes into your pension£20,000a year, 40p for each £1

Paid by tax you don’t pay£12,000a year, £8,000 of it claimed on your tax return

Over 30 years at 5% a year that could grow to £1.36 million. Put the same £8,000 a year into an ISA instead and you’d have £544,000. Even if everything beyond the tax-free part were taxed at 40% when you draw it, you’d keep about £923,000, £379,000 more than the ISA.

Change the salary and amount below. Illustration only: growth isn’t guaranteed, and tax rules can change before you retire.

Figures checked 16 Oct 2026 for the 2026/27 tax year (6 April 2026 to 5 April 2027), for England, Wales and Northern Ireland, and Scotland’s own income tax bands. Tax rules change, usually at each Budget. Next review: after the next Budget, and by 6 April 2027.

Salary a year£Into your pension a year£16.7%Where you liveStudent loan

My employer adds its National Insurance saving to my pension (some do, with salary sacrifice)

With nothing going into a pension you’d take home £6,346 a month (£76,157 a year). Putting £20,000 a year (£1,667 a month) into your pension costs you:

Salary sacrifice

£633 a month less take-home

£20,000 a year into your pension

Each £1 in your pension costs you 38p

Your pay is cut and your employer pays the difference into your pension. Saves income tax, National Insurance and student loan repayments.

Workplace pension from pay

£667 a month less take-home

£20,000 a year into your pension

Each £1 in your pension costs you 40p

Taken from your pay before tax (a “net pay” scheme). Saves income tax at your top rate, but not National Insurance.

SIPP or personal pension

£667 a month less take-home

£20,000 a year into your pension

Each £1 in your pension costs you 40p

Includes £8,000 a year you claim back through a tax return.

Paid from your take-home pay. The provider adds 20%; higher-rate taxpayers claim the rest through a tax return.

Take-home pay, a year
A year	No pension	Salary sacrifice	Workplace	SIPP
Income tax	£39,432	£27,432	£27,432	£31,432
National Insurance	£4,411	£4,011	£4,411	£4,411
Into your pension	£0	£20,000	£20,000	£20,000
Take-home pay	£76,157	£68,557	£68,157	£68,157

On your next £1,000 of pay, with no pension, you’d keep £380. SIPP income tax is after the relief you claim back. Annual figures for 2026/27; no tax code changes, benefits or other income.

What it could grow to

Years until you draw itGrowth a year, after charges%

Your pension (SIPP)£1,358,960about £1,140,823 after basic-rate tax when you draw it, £922,686 at 40%

The same £667 a month in an ISA instead£543,584tax-free, and you can take it out any time

For £667 a month less take-home pay, £1,667 a month goes into your pension. That head start is the tax relief, and it compounds for 30 years. An ISA is more flexible, and for money you may need before 57 (the earliest most people can draw a pension from 2028) it’s the better home. For retirement, the pension usually wins.

Illustration only. After tax assumes a quarter is taken tax-free (up to the £268,275 limit) and the rest is taxed at 20% or 40% when drawn. From April 2027 unused pensions can count towards inheritance tax. Growth is not guaranteed and investments can fall.

Things to know

Take your employer’s full match first. If your employer pays in more when you do, that’s usually the best return available anywhere.
Salary sacrifice lowers your pay on paper. That can reduce mortgage offers, some state benefits and life cover linked to salary, and it can’t take you below the minimum wage.
The National Insurance saving is being capped. From April 2029 only the first £2,000 a year sacrificed into a pension will be free of National Insurance. More on salary sacrifice.
Between £100,000 and £125,140 pension contributions also win back your personal allowance, so each £1 in your pension can cost you as little as 38p. The £100,000 trap.
The annual allowance is £60,000 a year for most people (less for very high earners), and you can’t get relief on more than you earn.

Where to open a SIPP or ISA

If you have a workplace pension, check whether it offers salary sacrifice and what its funds charge. For a SIPP or stocks and shares ISA of your own, the platform’s charges matter most over time. Look at:

Percentage or flat fee. A percentage fee (often 0.15% to 0.45% a year) suits small pots; a flat fee usually wins as the pot grows. Put both into the fee calculator.
Fund charges on top. A global tracker can cost under 0.25% a year; many active funds cost 0.75% or more.
Trading and exit fees, and whether you can hold the ISA and the SIPP in one place.

General information, not tax or financial advice: we don’t know your circumstances. Free, impartial guidance: MoneyHelper. Rates from GOV.UK rates and thresholds 2026 to 2027 and Scottish income tax 2026 to 2027.