Salary Sacrifice Pension Calculator 2026/27
Salary sacrifice is an arrangement where you give up part of your salary and your employer pays the equivalent amount directly into your pension. Because your contractual pay is reduced, both you and your employer pay National Insurance on a smaller amount. For basic rate taxpayers in 2026/27, every £100 sacrificed saves approximately £8 in employee NI. Employers save 15% in employer NI on the same amount. This calculator shows your exact NI savings, the real cost to your take-home pay, and how much more ends up in your pension compared with a standard contribution.
How salary sacrifice works in practice
When you use salary sacrifice, your employer formally reduces your salary by the sacrifice amount and pays that sum directly into your pension as an employer contribution. The pension pot receives exactly the same amount as before, but because your stated salary is lower, both you and your employer pay NI on a smaller figure.
2026/27 NI rates used in this calculator
| NI type | Rate | Applies to |
|---|---|---|
| Employee NI (Class 1) | 8% | Earnings £12,570 to £50,270 |
| Employee NI (Class 1) | 2% | Earnings above £50,270 |
| Employer NI (Class 1) | 15% | Earnings above £5,000 |
Things to check before switching
Salary sacrifice reduces your contractual salary, which can affect mortgage applications, statutory maternity or sick pay calculations, and some benefit entitlements. Always confirm with your employer what their policy is on passing on NI savings, and check that your reduced salary stays above the National Living Wage if relevant.
Frequently asked questions
With salary sacrifice, you agree to give up part of your salary in exchange for your employer making a larger pension contribution. Because your contractual salary is reduced, both you and your employer pay NI on a smaller amount. In 2026/27, employees pay 8% NI on earnings between £12,570 and £50,270, so sacrificing £1,000 saves approximately £80 in employee NI. Employers pay 15% NI on earnings above £5,000, saving approximately £150 on the same £1,000.
Your gross salary is reduced, but your take-home pay falls by less than the amount sacrificed because you save both income tax and National Insurance on the sacrificed amount. For a basic rate taxpayer, sacrificing £100 per month typically only reduces take-home pay by around £72, because you save £20 in income tax and £8 in employee NI.
Some employers pass all or part of their NI saving into your pension pot as an additional contribution. This is not a legal requirement, so it varies by employer. It is worth asking your HR or payroll team whether your employer has a policy of sharing NI savings with employees who use salary sacrifice.
Yes. Because your contractual salary is lower, salary sacrifice can affect mortgage affordability assessments, statutory maternity and sick pay, and income-related benefits. Check that your post-sacrifice salary does not fall below the National Living Wage if you are a lower earner.
With salary sacrifice your employer reduces your salary and pays more into your pension directly, saving both employee and employer NI. With relief at source you pay from net pay and the provider reclaims basic rate tax from HMRC. Relief at source does not save NI for either party. Salary sacrifice is generally more tax-efficient.
Disclaimer: This calculator provides estimates for guidance purposes only. It does not constitute financial advice. Always consult a regulated financial adviser for personal pension planning.