Emma’s Situation
Emma works full-time and earns £14,000 per year. She’s a member of her employer’s workplace pension scheme, which operates on a net pay basis — meaning her pension contributions are taken before tax is calculated.

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Her employer contributes 3% of her salary (£420 per year), as long as she contributes at least 5% (£700 per year). Emma told us she doesn’t rely on her salary for everyday expenses and wanted to contribute 95% of it (around £13,300 per year) to grow her pension as quickly as possible — a great commitment to her financial future.

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The Challenge
Because Emma’s income is below the Personal Allowance (£12,570 for 2024/25), most of her salary isn’t taxed. In a net pay pension scheme, this means she doesn’t receive the 20% government top-up (tax relief) on contributions that fall below this threshold.

So, if she were to pay almost all of her salary into her workplace pension, she would miss out on valuable government contributions — effectively reducing how much her money could grow each year.

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Our Recommendation

Step 1: Maintain the minimum contribution to the workplace pension

• Emma contributes 5% of her salary (£700 per year).

• Her employer adds their 3% contribution (£420 per year).

• Total into the workplace pension: £1,120 per year

Step 2: Open a personal pension or SIPP

• Emma contributes the remaining £12,600 into a personal pension.

• Personal pensions operate on a relief at source basis — meaning the government automatically adds 20% tax relief, even on untaxed income.

• This turns her £12,600 contribution into £15,750, including tax relief.

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The Outcome

​By following this approach, Emma contributed £700 into her workplace pension, which was matched by her employer’s £420 contribution, giving her £1,120 in total. She then placed the remaining £12,600 into a personal pension, where the government added £3,150 in tax relief — bringing that pot to £15,750. Altogether, this meant Emma saved £16,870 towards her retirement, compared to just under £13,600 if she had paid everything into her workplace scheme. That’s an additional £3,200 added to her pension each year through a simple change in how her contributions were structured.​​

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Why This Works

• Emma still benefits from her employer’s valuable pension contributions.

• She doesn’t lose out on government tax relief due to the structure of her workplace scheme.

• Her pension grows faster with the added tax relief.

• She gains more flexibility and control through her personal pension or SIPP.

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Summary
By taking tailored advice, Emma was able to make a simple adjustment that significantly improved the efficiency of her pension savings. She continues to benefit from her employer’s contributions while also receiving full government tax relief through her personal pension. This approach allows her retirement savings to grow faster and gives her greater flexibility and control over her future financial plans.

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For more information on retirement planning, click here.

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