Private pension contribution is an arrangement where an employee agrees to reduce their Assignment Rate in exchange for increased pension contributions from their employer. This results in a lower salary for the employee, but the sacrificed amount is paid directly into their pension, leading to potential tax and National Insurance savings for both the employee and the employer.

The main advantage of this type of private pension contribution is the potential for higher take-home pay due to lower National Insurance contributions, as well as the increased tax efficiency of pension saving.

So the concept is straightforward – but how much will you actually save?

Because you exchange a portion of your Assignment Rate for pension contributions, you are more tax efficient because the pension is paid over to your chosen provider as a Gross Employer contribution, so no tax is deducted from this amount.

In terms of overall savings, here is what you can expect: