Relief at Source vs Net Pay: Which Pension Do You Have?

There are two ways workplace pensions handle tax relief in the UK: Relief at Source and Net Pay. If you're a higher-rate taxpayer, knowing which one you have could be worth thousands of pounds.

One method means you need to claim extra tax relief yourself. The other handles everything automatically.

Most people have no idea which type they're in. Here's how to find out, and what to do about it.

The Two Methods Explained

Relief at Source (RAS)

With Relief at Source, your pension contribution is taken from your salary after tax has been deducted. Your pension provider then claims 20% basic-rate tax relief from HMRC and adds it to your pension pot.

Example: You contribute £100. It comes out of your take-home pay. Your pension provider claims £25 from HMRC (that's the 20% grossed up). Your pension pot receives £125.

Who uses Relief at Source?

• NEST
• The People's Pension
• NOW: Pensions
• Most auto-enrolment schemes
• Most personal pensions

Net Pay

With Net Pay, your pension contribution is taken from your salary before tax is calculated. You get full tax relief immediately through your payroll, at whatever your marginal rate is.

Example: You earn £5,000 this month and contribute 5% (£250). Tax is calculated on £4,750 instead of £5,000. If you're a 40% taxpayer, you automatically save £100 in tax.

Who uses Net Pay?

• Most traditional occupational schemes
• Public sector pensions (NHS, Teachers, Civil Service)
• Many larger employer schemes

Why This Matters for Higher-Rate Taxpayers

If you're a basic-rate taxpayer (earning under £50,270), both methods give you the same result. You get 20% tax relief either way.

But if you're a higher-rate taxpayer, the method makes a significant difference.

With Net Pay: You automatically get 40% relief. Nothing more to do.

With Relief at Source: You only get 20% automatically. The extra 20% you're entitled to? You have to claim it from HMRC yourself.

This is where billions of pounds go unclaimed every year. Higher-rate taxpayers in RAS schemes don't realise they need to take action to get their full relief.

How to Tell Which Type You Have

Method 1: Check Your Payslip

Look at how your pension contribution is described:

Signs of Relief at Source:

• Pension deduction appears after tax calculation
• Deduction is from your "net pay" section
• You might see a separate "employer contribution" line

Signs of Net Pay:

• Pension deduction appears before tax calculation
• Your "taxable pay" is reduced by your contribution
• Tax is calculated on a lower figure

Method 2: Check Your Pension Provider

Look up your pension scheme:

Relief at Source schemes:

• NEST (National Employment Savings Trust)
• The People's Pension
• NOW: Pensions
• Smart Pension
• Most personal pensions (Aviva, Scottish Widows, etc. for personal schemes)

Net Pay schemes:

• NHS Pension
• Teachers' Pension
• Local Government Pension Scheme
• Civil Service Pension
• Universities Superannuation Scheme (USS)

Method 3: Ask Your HR Department

If you're still unsure, your HR or payroll department should be able to tell you which method your workplace pension uses.

Method 4: Look at the Numbers

If you contribute 5% of a £60,000 salary, that's £3,000 per year or £250 per month.

If Relief at Source: Your payslip shows £200 deducted (because £200 + 20% tax relief = £250 in your pension)

If Net Pay: Your payslip shows £250 deducted, and your taxable pay is reduced by £250

What To Do If You Have a Relief at Source Pension

If you're a higher-rate taxpayer with a Relief at Source pension, you need to claim your additional tax relief. You have several options:

Self Assessment

If you already file a tax return, add your pension contributions to your Self Assessment. The extra relief will be calculated automatically.

Contact HMRC Directly

You can write to HMRC or call them to claim. You'll need details of your contributions for each tax year. They'll either send a refund or adjust your tax code.

Use a Claim Service

Document preparation services can handle the paperwork for you, generating personalised claim letters for each tax year.

What If You Have a Net Pay Pension?

Good news: you're already getting your full tax relief. No action needed.

However, it's worth double-checking that your payroll is set up correctly. Mistakes do happen, and some employees end up in the wrong tax code or with incorrectly configured pension deductions.

The Net Pay Anomaly (Low Earners)

There's an interesting quirk that affects low earners. If you earn under the personal allowance (£12,570) and you're in a Net Pay scheme, you don't get any tax relief at all, because you're not paying any tax to be relieved.

But if you were in a Relief at Source scheme, your provider would still claim 20% from HMRC, effectively giving you a government bonus.

This is called the "Net Pay anomaly." From April 2024, HMRC began making top-up payments to affected low earners to fix this inequality.

How Far Back Can You Claim?

If you've been in a Relief at Source pension as a higher-rate taxpayer and never claimed the extra relief, you can go back four years plus the current year.

For 2025/26, that means you can claim for:

• 2021/22
• 2022/23
• 2023/24
• 2024/25
• 2025/26

Each April, you lose the oldest year. Don't let your 2021/22 claim expire in April 2026.

Check Your Eligibility

If you're not sure whether you're owed money, the quickest way to find out is to use our free calculator. Enter your salary and contribution details, and you'll see an estimate of what you could claim back.

Most higher-rate taxpayers in Relief at Source schemes are owed at least £1,000. Many are owed £3,000 to £5,000 or more.