Brits earning six-figures are increasingly finding their salary doesn't stretch as far as expected – but smart use of pension saving can help protect the money in their pockets.
Earning power of £100,000 is often seen as a benchmark of wealth. But for the HENRYs – High Earners but Not Rich Yet – the reality can be far less luxurious than imagined.
Faced with frozen income tax thresholds, rising living costs, and increasing family expenses, many professionals earning over £100,000 are still facing financial pressures and wondering where their money is going.
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The tax situation for HENRYs can feel particularly harsh. Those earning more than £100,000 begin to lose their tax-free personal allowance of £12,570. For every £2 earned over the limit, £1 is lost from the personal allowance, until it is completely lost by the time they hit a wage of £125,140.
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As a result, HENRYs earning between £100,000 and £125,140 face a marginal income tax rate of 60% and see much less of their six-figure salary in their pay packet.
With less than six months to go until tax year end, however, there are ways high earners can protect more of their income from the taxman – by diverting some of their income into their pension for future use.
Mike Ambery, retirement savings director at Standard Life, said: “High earners can face sharp tax thresholds, lose key allowances like tax-free childcare or the personal allowance, all whilst managing rising living costs that make it harder to build long-term wealth. It can be surprising how little is left to save once everything is accounted for.
“One of the most effective ways to take control of your financial situation and protect more of your income is through pension saving. By recovering lost allowances and making the most of employer contributions, HENRYs can not only reduce their tax bill now, but also build savings for the future.”
Top tips for HENRYs looking to protect their income
If you’re a UK taxpayer you can claim pension tax relief on your contributions. Basically this is a top up from the government into your pension to encourage you to save for retirement. The amount of relief you can claim is based on the rate of income tax you pay, with most receiving an automatic 20% top-up from the government.
Higher-rate taxpayers can reclaim an additional 20%, while additional-rate taxpayers can claim up to 25% extra – giving them a total of 40% or 45% tax relief respectively. “However, this doesn’t always happen automatically,” said Dean Butler, managing director for retail direct at Standard Life.
“If you’re paying into a pension through a method like personal contributions, you may need to complete a self-assessment tax return to claim what you’re owed.” Forgetting to claim what you’re owed is like throwing away cash that could otherwise boost your retirement savings.
2. Use pension saving to recover your tax-free personal allowance
Higher earners who are caught in the 60% tax trap – those on £100,000 to £125,000 – because they lose their personal allowance, can claw back more of their money by making a gross pension contribution to bring their adjusted net income back below £100,000.
In doing this, you not only save higher‑rate tax on that amount, but you also regain your personal allowance – effectively receiving 60% tax relief on the pension contribution.
“For those using salary sacrifice, the combined tax and National Insurance savings can push the overall benefit even higher – up to 67%,” said Butler. This means a £100 pension contribution will effectively only cost the saver just £33.
“For high earners caught in this tax band, it’s a rare opportunity to turn what feels like a tax penalty into long‑term pension growth,” Butler said.
3. Consider salary sacrifice
In addition to salary sacrifice pension contributions, many employers offer salary sacrifice arrangements for other benefits such as cycle-to-work schemes, ultra-low emission or electric vehicles, and additional annual leave. These options can help HENRYs make tax-efficient lifestyle choices while reducing their taxable income.
When you pay for things through your company payroll using your pre-tax salary, you pay less income tax and National Insurance.
“However using these schemes may affect entitlements like mortgage applications or statutory pay, so it’s worth checking the details,” said Butler.
4. Increase your pension contributions to keep more of your child benefit
Child benefit begins to taper once income exceeds £60,000, disappearing entirely by £80,000. Increasing pension contributions can reduce your adjusted net income, helping you keep more – or all – of your entitlement.
“It’s a practical way to ease some of the financial pressure while building long-term security for the future,” Butler said.
