Is it worth paying more into your pension?

Extra pension contributions get tax relief and sometimes an employer match. Both are generous. Neither helps if you have a credit card bill and no savings.

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The short answer

Pension contributions get income tax relief at your rate, so £100 in a pension costs a basic rate taxpayer £80 and a higher rate taxpayer about £60. Employer matching is usually worth more than the relief. Most people can pay in up to £60,000 a year, capped at their earnings.

£60,000Annual allowance for most people

£80What £100 in a pension costs at basic rate

£60What it costs at higher rate

£3,600What a non-earner can still pay in

What is on this page

Tax relief is the reason it works
Employer matching beats everything else
The limits to stay inside

Tax relief is the reason it works

A pension contribution gets income tax relief at your rate. That makes it the cheapest way most people can move money into long-term savings.

Your tax rate	Cost of £100 in your pension	Effective boost
Basic rate, 20%	£80	25% on what you paid
Higher rate, 40%	£60	About 67% on what you paid
Additional rate, 45%	£55	About 82% on what you paid

Higher and additional rate relief above the basic rate is usually claimed through a tax return or by contacting HMRC. Scottish rates differ.

Higher rate taxpayers who never claim the extra relief are giving money away.

Employer matching beats everything else

If your employer matches extra contributions, that is an immediate return no investment can promise. Many schemes match up to a set percentage.

A scheme matching an extra 3% turns your £100 into £200 before tax relief. After basic rate relief the £200 cost you £80. Nothing else available to a normal employee does that.

Check your scheme booklet for the maximum match. Take all of it before you consider anything else.

The limits to stay inside

The annual allowance is £60,000 for most people
You can only get relief on contributions up to your earnings
Non-earners can still pay in £3,600 a year gross
A tapered allowance applies if threshold income is over £200,000 and adjusted income over £260,000
Taking taxable pension income cuts the limit to £10,000
Unused allowance from the last three years can sometimes be carried forward

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Where you stand

Increase contributions if

Your employer matches and you are not taking the full match
You pay higher rate tax and claim the extra relief
You have no expensive debt and a working emergency fund
You are close to a threshold that extra contributions would move you under

Do something else first if

You are paying over 20% interest on anything
You have no accessible savings at all
You will need the money before age 55 (57 from 6 April 2028)
You have already taken taxable pension income this year

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Questions people actually ask

How much can I pay into a pension each year?

Most people can pay in up to £60,000 a year across all pensions with tax relief, capped at their earnings. Non-earners can pay in £3,600 gross.

Do I get tax relief automatically?

Basic rate relief is usually added automatically. Higher and additional rate relief generally has to be claimed through a tax return or by contacting HMRC.

Is it better to pay into a pension or overpay the mortgage?

It depends on the mortgage rate, your tax rate and whether your employer matches. Employer matching usually wins. After that, compare the mortgage rate with what you reasonably expect a pension to return.

Can I carry forward unused allowance?

Often yes, from the previous three tax years, as long as you were a member of a pension scheme in those years and have enough earnings this year.

What is salary sacrifice?

You give up part of your salary and your employer pays it into the pension instead. It saves National Insurance for both of you. Check the effect on mortgage affordability and on any benefits linked to salary.

How do I check broadband speed at a property?

Use Ofcom's free broadband and mobile checker at checker.ofcom.org.uk. Enter the property's postcode and choose the address to see which broadband speeds and mobile coverage are available before you make an offer.

Where to go next

Where these figures come from

Figures checked on 1 September 2026 and correct for the 2026/27 tax year. Rates change, so check the source before you act on a number.

Written by Ben Tomlin. Pension advice goes to a separately authorised firm we have vetted. The introduction costs you nothing. If you go ahead, we may be paid a fee by that firm.

Last reviewed September 2026.

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