Salary sacrifice pension vs Net pay / relief at source
Side-by-side comparison, when-to-use-each guide, and instant conversion. Reviewed for 2026.
Employer offers it (most do) — always choose salary sacrifice if available.
Self-employed (relief at source via SIPP), employer doesn't offer salary sacrifice.
| Aspect | Salary sacrifice pension | Net pay / relief at source |
|---|---|---|
| NI saving (employee) | Yes — saves 8-12% NI | No NI saving |
| NI saving (employer) | Yes — saves 13.8% | No NI saving |
| Effect on take-home | Slightly less (but pension gains more) | Direct pension contribution |
| State pension impact | May reduce (check if near threshold) | None |
| Best for | Employed workers whose employer offers it | Self-employed / SIPP holders |
Frequently asked
How much does salary sacrifice actually save?
A basic-rate taxpayer on £35k contributing £200/month via salary sacrifice saves 20% income tax + 8% NI = 28% total. That £200 contribution only costs £144 from take-home pay. A higher-rate taxpayer saves 40% + 2% NI = 42% — the £200 costs just £116.
Does salary sacrifice affect my mortgage application?
Technically yes — lenders assess affordability based on your salary after sacrifice, which is lower. In practice, for modest pension contributions the impact is small. Declare both your contractual salary and the sacrificed amount to lenders — many will use the higher figure.