What this calculator does
Takes gross salary, monthly savings amount, marginal tax rate, National Insurance rate, contribution method (salary sacrifice vs ISA), and time horizon. Compares the projected retirement pot and estimated net drawdown value for each wrapper.
The formula
ISA (post-tax contribution): Monthly investment = gross_saving × (1 − marginal_tax_rate) FV = PMT_isa × [(1 + r/12)^(n×12) − 1] / (r/12) Drawdown: fully tax-free Pension via salary sacrifice: Monthly investment = gross_saving (full gross — tax and NI saved) NI saving = gross_saving × employee_NI_rate FV = PMT_pension × [(1 + r/12)^(n×12) − 1] / (r/12) Drawdown: 25% tax-free lump sum; remainder taxed as income For basic rate taxpayers: Pension costs 80p in the £1 (via relief at source) vs ISA 100p Same effective cost, pension puts more to work For higher rate taxpayers: Pension costs 60p in the £1 vs ISA 100p — significant advantage Plus NI savings with salary sacrifice ISA annual allowance: £20,000 Pension annual allowance: lesser of £60,000 or 100% of earnings
Assumptions
- Pension drawdown tax is estimated using the current basic rate — actual retirement tax depends on total income in retirement.
- Employer contributions are not modelled separately; salary sacrifice figures should be entered inclusive of any employer NI saving passed on.
- The pension lifetime allowance is not modelled (it was abolished from April 2024).
- State pension income is not modelled.
- Constant return rate and constant tax rates throughout the projection.
Data sources
| Figure | Value used | Source | Last checked |
|---|---|---|---|
| ISA allowance | £20,000 | HMRC — Individual Savings Accounts | May 2026 |
| Pension annual allowance | £60,000 | HMRC — Pension annual allowance | May 2026 |
| Basic income tax rate | 20% | HMRC — Income Tax rates | May 2026 |
| Higher income tax rate | 40% | HMRC — Income Tax rates | May 2026 |
| Employee NI rate (basic) | 8% | HMRC — National Insurance rates | May 2026 |
Limitations
- Pension drawdown tax depends on total retirement income — the calculator uses the current basic rate as an estimate, which may understate or overstate the actual tax liability.
- Does not model employer contributions (enter salary sacrifice figures inclusive of any employer NI saving passed on to the employee).
- Does not model the pension lifetime allowance (abolished April 2024).
- Does not model state pension income.
- Does not account for the tapered annual allowance that applies to very high earners.
Worked example
Inputs: higher rate taxpayer, £60,000 salary, saving £1,000/month gross, 25 years, 7% return.
ISA: Net contribution: £1,000 × (1 − 40%) = £600/month FV = £600 × [(1.00583)^300 − 1] / 0.00583 ≈ £486,000 Drawdown: £486,000 (fully tax-free) Pension (salary sacrifice): Gross contribution: £1,000/month NI saving (employee, 8%): £80/month extra FV = £1,000 × [(1.00583)^300 − 1] / 0.00583 ≈ £810,000 Drawdown: 25% tax-free (£202,500) + 75% taxed as income Estimated net (basic rate in retirement): ≈ £688,000 Pension advantage over 25 years: approximately £202,000 more net
Changelog
| Date | Change |
|---|---|
| May 2026 | Initial publication |