Sorry if I sound daft

Little_bit_taller

I pay 10% into my pension and my employer matches. If I pay in say 11% does that mean I pay less tax so don't notice the difference in my wages? I am a 20% tax payer. Thanks

El_Torro

It depends how you pay. Regardless you will notice some difference in take home pay. 

If you up your pension contributions by £10 (for example) then your take home pay might reduce by £8, or possible £7. 

Benefits might also play a factor. Depending on your situation you might be entitled to some extra benefits if you increase your pension contributions.

atari_st

Little_bit_taller said:

I pay 10% into my pension and my employer matches. If I pay in say 11% does that mean I pay less tax so don't notice the difference in my wages? I am a 20% tax payer. Thanks

Does your employer take your 10% using salary sacrifice? Assuming this is the case then paying 11% instead of 10% will mean that your take home pay will be slightly lower however so will your tax as it will be 20% on your lower gross pay. Assuming that you earn enough to actually pay tax over your personal allowance of course. 

Little_bit_taller

Thanks for comments. Yes it is taken via salary sacrifice. I earn roughly £40500 a year. What would I lose in take home pay if I up payments to pension?

El_Torro

Assuming you have a standard tax code you should currently be taking home £2,440.50 per month. Going from 10% to 11% pension contributions mean that you should take home £2,416.87 per month.

I have assumed the 2024/2025 tax year for these contributions. 

This website is pretty handy, it lets you play around with the figures and see your own scenarios: https://www.thesalarycalculator.co.uk/salary.php

Little_bit_taller

Ok so what would I be paying into my pension as a result i.e. is it worthwhile?

El_Torro

Your pension will increase by an extra £33.75 per month, your take home pay will decrease by £23.63 per month.

Whether this is worthwhile depends on how much is in your pension currently, when you plan to retire, and how much you want to have in your pension pot when you retire.

Albermarle

Little_bit_taller said:

Ok so what would I be paying into my pension as a result i.e. is it worthwhile?

In terms of having a bigger pension/more income when you retire, then it would improve that situation.