Pension For Employees And Individuals

Most employees in the UK are automatically enrolled into a workplace pension scheme if they:

• Earn more than £10,000 per year,
• Are aged between 22 and State Pension age, and
• Work in the UK.

Under auto-enrolment, you and your employer both pay into your pension (current minimum amount 8%)

• You contribute 5% of your qualifying earnings (you can pay more)
• Your employer contributes at least 3%.

The government also adds tax relief, boosting your total savings even further.

There are limits on how much you can contribute to your pension each year without paying extra tax — this is known as your Annual Allowance.

For the 2025/26 tax year:

• The standard annual allowance is £60,000, or up to 100% of your earnings (whichever is lower).
• Higher earners may have a tapered annual allowance, which reduces the limit depending on your income.
• You can also carry forward unused allowance from the previous three tax years if you haven’t used it all (but you must have been part of a pension in those previous years).

This means you can make larger contributions in years when you have extra income — for example, from a bonus.

A bonus sacrifice (or bonus exchange) scheme is when you agree with your employer to give up all or part of your cash bonus, and instead have it paid into your pension.

Here’s why it can be a great move:

• You won’t pay Income Tax or National Insurance on the sacrificed amount.
  
• You’ll get more of your bonus working for your future, rather than being lost to tax.
  

Example:
If you receive a £5,000 bonus, and you use the sacrifice bonus scheme into your pension instead, the full £5,000 goes straight into your pensions pot.

Before making any changes to your pension contributions or setting up a bonus sacrifice:

• Speak to your employer or HR team — not all schemes offer this option.
• Check your total contributions don’t exceed your annual allowance.
• Be aware that sacrificed bonuses can slightly affect things like mortgage applications, as they reduce your “taxable income” figure.

At R & B Accountants we help company directors inform their employees on their pension scheme:

• Review their pension contributions and maximise tax efficiency.
• Set up or manage salary and bonus sacrifice schemes.
• Calculate available allowances and avoid unexpected tax charges.

We make the numbers clear, so you can make confident choices about your future.

Your pension is one of the most powerful ways to build long-term wealth — and with the right strategy, you can make it work even harder for you.