Question 1

How does tax relief on pension contributions actually work?

Accepted Answer

When you put money into your pension, the government adds a bonus. If you're a basic-rate taxpayer (20%), for every £80 you contribute, the government adds £20, making it £100 in your pension. Higher-rate taxpayers (40%) can claim an additional £20 back through their tax return, meaning your £100 pension contribution only costs you £60. It's one of the best tax breaks available.

Question 2

What's salary sacrifice and should I use it?

Accepted Answer

Salary sacrifice means you agree to a lower salary in exchange for your employer paying more into your pension. This saves both you and your employer National Insurance. For example, if you sacrifice £200/month, you might only see £140-£160 less in your take-home pay, while £200 goes into your pension. Some employers even add their NI savings to your pension too, giving you free extra money.

Question 3

When can I access my pension money?

Accepted Answer

You can start taking money from your pension from age 55 (rising to 57 in 2028). You can take 25% as a tax-free lump sum, and the rest is taxed as income when you withdraw it. You don't have to take it all at once – most people spread withdrawals over their retirement to manage their tax bill.

Question 4

How much should I be paying into my pension?

Accepted Answer

A rough rule of thumb: take the age you start seriously saving and halve it – that's the percentage of your income to save. So if you start at 30, aim for 15% (including employer contributions). But this varies hugely based on when you want to retire and what lifestyle you're aiming for. Use our Retirement Goal Calculator to get a personal target.

Question 5

What happens to my pension if I die?

Accepted Answer

If you die before 75, your pension can usually pass to your loved ones completely tax-free. If you die after 75, they'll pay income tax when they withdraw it. Unlike most assets, pensions don't count as part of your estate for inheritance tax, making them a powerful way to pass on wealth.

Question 6

Should I pay off my mortgage or save into my pension?

Accepted Answer

This is personal, but here's the key: pension contributions come with a 20-40% government bonus (tax relief), and mortgage interest typically costs 4-6%. That tax relief often tips the balance towards pensions, especially if you're a higher-rate taxpayer. However, the security of owning your home outright has real value. Many people do both – maintain minimum pension contributions for the tax relief and employer match, while also overpaying the mortgage.

Question 7

What if my employer doesn't offer a pension?

Accepted Answer

By law, most UK employers must offer a workplace pension (auto-enrolment). If yours doesn't, or if you're self-employed, you can open a personal pension (SIPP). You still get the 20% tax relief automatically, and can claim more if you're a higher-rate taxpayer. However, you'll miss out on employer contributions, which is like refusing free money.

Question 8

How are workplace pensions different from the State Pension?

Accepted Answer

The State Pension is money from the government (currently around £11,500/year if you have enough National Insurance contributions). A workplace pension is your own pot of money that you and your employer pay into. Most people need both – the State Pension covers basics, but isn't enough for a comfortable retirement. Your workplace pension tops this up.

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Pension Calculator (UK)Model Your Pension Growth

Before You Begin

Pension Settings

How Your Pension Could Grow Over Time

What This Costs You Each Month

Your Pension Snapshot

Assumptions & Notes

Save to Your Financial Plan

What's Next?

Retirement Savings Hub

How Pension Tax Relief Really Works

Pension Allowances Guide

UK FIRE Guide

FIRE Calculator

About the author

Frequently Asked Questions

How does tax relief on pension contributions actually work?

What's salary sacrifice and should I use it?

When can I access my pension money?

How much should I be paying into my pension?

What happens to my pension if I die?

Want to See Your Pension Grow?

Should I pay off my mortgage or save into my pension?

What if my employer doesn't offer a pension?

How are workplace pensions different from the State Pension?

Did these FAQs answer your question?

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We use cookies

Before You Begin

Pension Settings

How Your Pension Could Grow Over Time

What This Costs You Each Month

Your Pension Snapshot

Assumptions & Notes

View calculation assumptions

Save to Your Financial Plan

What's Next?

Retirement Savings Hub

How Pension Tax Relief Really Works

Pension Allowances Guide

UK FIRE Guide

FIRE Calculator

About the author

Frequently Asked Questions

How does tax relief on pension contributions actually work?

How does tax relief on pension contributions actually work?

What's salary sacrifice and should I use it?

What's salary sacrifice and should I use it?

When can I access my pension money?

When can I access my pension money?

How much should I be paying into my pension?

How much should I be paying into my pension?

What happens to my pension if I die?

What happens to my pension if I die?

Want to See Your Pension Grow?

Should I pay off my mortgage or save into my pension?

Should I pay off my mortgage or save into my pension?

What if my employer doesn't offer a pension?

What if my employer doesn't offer a pension?

How are workplace pensions different from the State Pension?

How are workplace pensions different from the State Pension?

Did these FAQs answer your question?

Feedback