Where should extra contributions go?
If you have spare cash — a bonus, a pay rise, or you've maxed out your ISA — topping up your pension is one of the most tax-efficient moves available. The question is where: an additional voluntary contribution (AVC) within your workplace scheme, or a separate SIPP you control. The answer depends on whether your employer matches AVCs and on the charges involved.
Options for additional contributions
| Route | Cost | Employer top-up? | Best when |
|---|---|---|---|
| Workplace AVC | Scheme charge (often 0.3–0.5%) | Sometimes matched | Employer adds to AVCs |
| Vanguard SIPP | 0.15% (cap £375) | No | Lowest-cost top-ups |
| AJ Bell SIPP | 0.25% | No | Wider fund choice |
| Salary sacrifice | Via payroll | Saves NI too | Employer offers it |
Use carry forward to pay in more
The annual allowance is £60,000 in 2026/27, but if you haven't used it all in the previous three tax years you can carry forward the unused amount and contribute more this year (provided you have the earnings to support it). This is especially useful for a one-off windfall or a strong self-employed year.
Salary sacrifice — the hidden winner
- Sacrificing salary into your pension also saves National Insurance, boosting the effective return.
- Some employers add the NI they save too, magnifying the benefit.
- It reduces taxable pay, which can help retain Child Benefit or the personal allowance.
For tax detail see our pension tax relief and best pension for high earners guides.
The order in which to add money
If you have spare cash to invest, a sensible hierarchy helps. First, capture any employer match you're not already getting — that's an instant return no investment can beat. Next, if you're a higher or additional-rate taxpayer, pension contributions give upfront relief that's hard to match elsewhere. Then weigh pension against ISA depending on whether you value the tax break now or accessibility later. Only after these would most people consider general investment accounts, which offer no shelter.
Bonuses and salary sacrifice
A bonus is an ideal candidate for an additional contribution because, sacrificed before it's paid, it escapes both income tax and National Insurance. On a £5,000 bonus, a higher-rate taxpayer might otherwise keep around £2,900; sacrificed into a pension, the full £5,000 lands in the pot, and some employers add their saved NI on top. Bonus sacrifice is one of the most efficient one-off moves available, so check whether your employer's scheme allows it.
Carry forward in practice
Carry forward lets you contribute more than the £60,000 annual allowance in a single year by using unused allowance from the three previous tax years, oldest first. You must have been a pension scheme member in those years and have enough relevant earnings in the current year to support the contribution. It's particularly useful after a windfall, an inheritance directed towards retirement, or a strong self-employed year, but the rules around tapering for high earners can complicate it.
Pitfalls to avoid with top-ups
- Exceeding the annual allowance without carry forward triggers a tax charge.
- Once you flexibly access a pension, the £10,000 money purchase annual allowance may bite.
- Higher earners may be caught by the tapered allowance, reducing how much they can add.
For the tax mechanics see our pension tax relief guide, and model top-ups with the pension calculator.
Turning spare cash into retirement security
Additional pension contributions are one of the most effective uses of spare money for anyone who has already secured their employer match and can afford to lock funds away until pension age. The combination of upfront tax relief, tax-free growth and, for many, the National Insurance saving from salary or bonus sacrifice makes the effective return on a top-up hard to beat elsewhere. The art lies in sequencing and timing: capture matched contributions first, use sacrifice where offered, and deploy carry forward to absorb windfalls that would otherwise breach the annual allowance. Higher-rate and additional-rate taxpayers in particular should make sure they actually reclaim the relief they're entitled to, as it's frequently left unclaimed. For most people a low-cost SIPP alongside the workplace pension is the ideal home for extra money, though a matched AVC takes priority where available. Whatever the route, topping up consistently rather than waiting for a single large gesture tends to produce the best long-term result.
Verdict
If your employer matches AVCs or offers salary sacrifice, use that first for the extra free money and NI saving. Otherwise, a low-cost SIPP like Vanguard or AJ Bell is the best home for additional contributions.