Taking your bonus as cash means losing a chunk to Income Tax and National Insurance. Paying it straight into your pension keeps the lot. Enter your salary and bonus to compare cash now against your pension pot.
Bonus sacrifice · per year
A cash bonus is stacked on top of your salary, so it's taxed at your marginal rate — often 40% or even an effective 60% if it pushes you through the £100,000 Personal Allowance taper. Add 8% or 2% National Insurance and a 9% student loan deduction, and a higher-rate earner can lose half the bonus. Bonus sacrifice diverts it into your pension before any of that applies, so the whole bonus lands in your pot.
| £10,000 bonus | As cash | Into pension |
|---|---|---|
| Basic-rate earner keeps | ~£7,200 | £10,000 |
| Higher-rate earner keeps | ~£5,800 | £10,000 |
| £100k taper earner keeps | ~£4,000 | £10,000 |
The catch is access: pension money is locked away until age 55 (57 from 2028), and you'll pay Income Tax on 75% of it when you draw it — though 25% is tax-free. For long-term saving it's hard to beat. Many employers also add their NI saving to your pot. Compare with sacrificing regular salary on the salary sacrifice pension calculator, or see the plain tax on a cash bonus on the bonus tax calculator.
By paying your bonus straight into your pension before it's taxed, you avoid Income Tax, the 8%/2% employee National Insurance and any student loan deduction on it. So a £10,000 bonus puts the full £10,000 into your pension instead of roughly £5,800 of net cash for a higher-rate earner.
If you don't need the cash now and want to boost your pension, it's very efficient — especially for higher earners or anyone near the £100,000 Personal Allowance taper. The downside is the money is locked until age 55 (57 from 2028).
When you eventually draw the pension, 25% is usually tax-free and the other 75% is taxed as income. Even so, most people pay a lower rate in retirement than the marginal rate they'd have paid on the cash bonus today.
Yes. A bonus that pushes you over £100,000 is effectively taxed at 60% because of the Personal Allowance taper. Sacrificing it into a pension keeps your income under £100,000, preserving your full Personal Allowance.
