Salary sacrifice vs relief at source
Salary sacrifice and relief at source add the same amount to a pension, but only sacrifice avoids employee National Insurance, charged under gov.uk's rules at 8% up to the upper earnings limit. This calculator sets out the estimated cost of each method for the entered figures; which suits an individual depends on circumstances it cannot assess.
How much extra does salary sacrifice save?
The two methods reach the same pension total by different paths. Relief at source takes the contribution from pay that has already been taxed, then the provider claims the income tax back and adds it to the pot, under HMRC's pension tax relief rules. Salary sacrifice instead cuts gross salary before any tax is worked out, so the amount never appears as taxable pay. The income tax result is the same either way, but only sacrifice also removes the amount from National Insurance.
That National Insurance difference is the whole gap between the two. Employee National Insurance is charged, under gov.uk's National Insurance rates, at 8% on earnings between the primary threshold and the upper earnings limit, then 2% above it. Relief at source cannot reduce this, because the contribution is made after National Insurance has already been taken. Salary sacrifice can, because the pay is gone before the National Insurance calculation runs. On the same contribution, this is the arithmetic difference between the two methods, not a recommendation of either.
What would this cost on my salary?
On a £45,000 salary, putting £5,000 into a pension is estimated to cost £4,000 through relief at source, once the income tax relief is counted. The same £5,000 through salary sacrifice is estimated to cost £3,600, a difference of about £400 of National Insurance. This example does not weigh entitlements linked to gross salary, such as mortgage borrowing or statutory pay, so which method suits an individual depends on circumstances this calculator cannot see.
Common questions
What is the difference between the two methods?
Salary sacrifice lowers your gross pay, so you avoid income tax and employee National Insurance on the amount that goes into your pension. Relief at source takes the contribution from taxed pay and adds income tax relief back, but it does nothing for National Insurance. Both put the same gross amount into the pension.
How much extra does salary sacrifice save?
For the same pension contribution, sacrifice also avoids employee National Insurance. On the figures shown, that saving is about £400 a year, so the same contribution is estimated to cost that much less through sacrifice, before other factors are weighed.
Does relief at source ever cost less overall?
Rarely on cost alone, since it does not touch National Insurance. However, not every employer offers salary sacrifice, and sacrifice lowers gross pay, which can affect entitlements linked to salary such as mortgage borrowing, statutory pay and some benefits. Relief at source keeps the headline salary unchanged. Which method suits an individual depends on these wider circumstances, which this calculator does not assess.
Do higher-rate taxpayers get all their relief automatically?
With salary sacrifice, yes, because the money is never taxed. With relief at source, only 20% is added automatically, and a higher-rate taxpayer must claim the rest through Self Assessment, under HMRC's pension tax relief rules. This comparison assumes the full income tax relief is received either way.
What would this cost on my salary?
On a £45,000 salary, putting £5,000 into a pension is estimated to cost £4,000 through relief at source, once income tax relief is counted. The same £5,000 through salary sacrifice is estimated to cost £3,600, a difference of about £400 in National Insurance. Neither figure accounts for entitlements linked to gross salary, so which method suits an individual depends on circumstances beyond these figures.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.