How payments are made

There are two ways that you can make payments into your pension - either through salary exchange or by deduction from after-tax earnings (by "after-tax" we mean after income tax and National Insurance). Both methods give you tax benefits, but they work in different ways.

If your earnings are below the personal allowance for income tax you won’t benefit from tax relief on your personal contributions as you don’t pay income tax. However, this doesn’t affect the amount that is paid into your pension and you’ll continue to benefit from the money that your employer pays in.

Your employer may call salary exchange something different, like salary sacrifice or SMART pensions, but they work in the same way.

If you're not sure how payments are made into your company pension, ask your employer.

Select your payment method for more information:

Tax rules and limits may change in the future. The information here is based on our understanding in April 2022. Your own circumstances - including where you live in the UK - also have an impact on tax treatment. Find out more about how tax rates can differ on