What a pay rise across a pension band costs

In the NHS Pension Scheme and the Local Government Pension Scheme (LGPS), the contribution rate is set by the band your pay falls into. When a pay rise takes you over a threshold, your rate rises as well. In the NHS, earning £1 more at one threshold can add about £519 a year to your contribution. The pay rise is still worth having, but the first few pounds above a threshold are partly spent on pension.

This guide works out the effect at each threshold. The bands themselves, and what each scheme pays you in return, are in the guides to the NHS Pension Scheme and the LGPS.

The thresholds in 2026/27

NHS Pension Scheme contributions from 1 April 2026 are based on your actual annual pensionable pay: 5.2 per cent up to £13,259, 6.5 per cent from £13,260 to £28,854, 8.3 per cent from £28,855 to £35,155, 9.8 per cent from £35,156 to £52,778, 10.7 per cent from £52,779 to £67,668 and 12.5 per cent above that.

In the LGPS in England and Wales, your employer sets your rate each April from your actual pensionable pay. The bands from April 2026 are 5.5 per cent up to £18,400, 5.8 per cent to £29,000, 6.5 per cent to £47,300, 6.8 per cent to £59,800, 8.5 per cent to £84,000, then 9.9, 10.5, 11.4 and 12.5 per cent for higher pay.

Worked examples in the NHS

These are hypothetical, and they assume the rate applies to all of your pensionable pay, as NHS member guidance describes. On £28,854 you would pay 6.5 per cent, which is £1,875.51 a year. On £28,855 you would pay 8.3 per cent, £2,394.97. That is £519.46 more a year, or about £43 a month, for £1 more pay.

The same happens at the next threshold. On £35,155 the contribution is £2,917.87, and on £35,156 it is £3,445.29, a difference of £527.42. At the top threshold the gap is larger: £7,240.48 at £67,668 against £8,458.63 at £67,669, or £1,218.15.

A pay rise that crosses a threshold still leaves you better off if it is big enough. Income Tax and National Insurance take their own share too. Say a rise takes pay from £28,854 to £30,354. At 8.3 per cent the contribution goes from £1,875.51 to about £2,519, an extra £644, so about £856 of the £1,500 is left before tax and National Insurance.

Worked examples in the LGPS

LGPS jumps are smaller at the lower thresholds. On £29,000 you would pay 5.8 per cent, £1,682.00. On £29,001, at 6.5 per cent, it would be £1,885.07, which is £203.07 more. The jump at £59,800 is larger: £4,066.40 compared with £5,083.09, a difference of £1,016.69.

The LGPS also has the 50/50 section, where you pay half the contribution and build up half the pension for the time you are in it. Under that option the cost at each threshold is lower, but so is the pension, and cover for death and ill-health benefits stays at the full level. The full detail is in the LGPS guide.

How part-time and extra pay interact

Both schemes band you on actual pay, not the full-time equivalent. A part-time worker paid £20,000 for their hours is banded on £20,000, not on the full-time salary of the post. In the LGPS the rate is also set separately for each job you hold. What counts as pensionable pay is defined by each scheme, so check whether extra payments such as overtime or enhancements count before assuming they move your band. The guide to part-time pensions has a worked example.

What the contribution costs after tax

Contributions are taken from pay before Income Tax in these schemes, so a taxpayer gets relief automatically. Pension tax relief explains how net pay arrangements work. The take-home effect of a jump is therefore smaller than the figures above. For a basic rate taxpayer, relief at 20 per cent would mean the extra £519.46 reduces take-home pay by roughly £415.57. To see your own figure, use the take-home pay calculator, and read how much of a pay rise you actually keep for the tax side.

The Civil Service alpha and Teachers’ Pension Scheme use banded rates too. Their own guides give the tables, and this guide does not work through their thresholds.