Pension salary sacrifice vs AVC is not a straight contest: one is a way of paying in that can save National Insurance, the other is an extra pot.
They answer different questions. Salary sacrifice describes how money reaches a pension. An additional voluntary contribution (AVC) describes what the money is: extra saving on top of your scheme's normal benefits. Which one is open to you depends on your employer and scheme. For your own pay, an FCA-authorised adviser can weigh salary sacrifice against an AVC; this page's form arranges the free call-back.
Is pension salary sacrifice the same as an AVC?
No. They sit on different axes, so one payment can be both. HMRC's guidance for employers defines the first: "A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit." For a pension, the benefit is a payment from your employer into the scheme in place of the pay you gave up.
The Local Government Pension Scheme (LGPS) describes the second: "When you pay Additional Voluntary Contributions (AVCs), you build up a pot of money which is used to provide benefits on top of your LGPS benefits." So an AVC is about adding to what you will retire on, whichever way the payment is made.
That is why the two can overlap. The same LGPS page says: "Your employer may offer a Shared Cost AVC through a salary sacrifice arrangement." For the plain mechanics of each, see pension salary sacrifice explained and what an AVC pension is.
Salary sacrifice and AVCs compared
| Salary sacrifice | AVC | |
|---|---|---|
| What it changes | Your contract: lower cash pay, higher employer contribution | Nothing in your contract; you pay extra into a pot |
| Who must offer it | Your employer | Your scheme, or a provider you choose yourself |
| Income Tax | Relief, as for all pension contributions | Relief, by a route that depends on how you pay |
| National Insurance | Can be saved, by you and your employer | No saving if paid from your pay; saved only if your employer offers it by salary sacrifice |
On Income Tax, GOV.UK's policy paper says: "Contributions through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits)." The LGPS, for one, takes AVCs from your pay before tax is worked out, so relief arrives automatically; net pay and relief at source are compared in their own guide. If you pay a provider yourself, GOV.UK says personal and stakeholder pensions use relief at source, where the provider claims 20% and adds it to your pot, and higher-rate taxpayers can claim more on a Self Assessment return.
The National Insurance row follows from how salary sacrifice works, covered next. Whether your own AVC payments could be moved into a salary sacrifice arrangement is a payroll question that the adviser can talk through on the call-back.
Where the National Insurance saving comes from
It arises because your pay is lower. HMRC's policy paper says: "Salary sacrifice allows some employers and employees to pay less Class 1 National Insurance contributions by exchanging part of an employee’s pay for pension contributions from their employer." It adds that this "is only available where it is offered by employers, and not everyone can use it." An ordinary AVC does not get this saving. HMRC's 2026 to 2027 employer guide to PAYE and National Insurance (CWG2) says: "Where you deduct contributions under the net pay arrangement, an employee is entitled only to tax relief, and not relief from National Insurance contributions." Payments to a provider from your take-home pay are made after National Insurance has been deducted, so they save none either.
That saving is what the 2029 reform targets. HM Treasury's November 2025 explainer says: "From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs." Above that, employer and employee National Insurance applies as it does to other employee workplace pension contributions; Income Tax relief stays. That plan is now law in outline: the National Insurance Contributions (Employer Pensions Contributions) Act 2026 applies from 2029-30 and says the first regulations under it must set the limit at £2,000. None had been made by 27 October 2026, so the working detail is still to come.
So the cap is about the salary sacrifice route, not about AVCs as such. The salary sacrifice changes page follows the timetable and the maximum-amount guide covers how much can be sacrificed.
What a lower salary can reach
Salary sacrifice leaves you with a smaller cash salary on paper, and HMRC's guidance lists what that can reach. It says: "Salary sacrifice can affect an employee’s entitlement to earnings related benefits such as Maternity Allowance and Additional State Pension." It also warns of effects on contribution-based benefits including the State Pension and on statutory pay. Employers usually decide how pay-linked items such as overtime rates and pay rises are worked out.
Schemes with a pension linked to pay feel it too. The NHS Pension Scheme members guide says a salary sacrifice arrangement that cuts pensionable earnings reduces the pension you build up that year. An AVC in the same scheme is treated differently: the NHSBSA says "If you contribute to MPAVC your pensionable earnings used to calculate your pension will not be affected."
There is an upside here too. A lower taxable salary also lowers adjusted net income, the measure behind Tax-Free Childcare eligibility and the Personal Allowance taper. HMRC adds that "Employees can still make pension contributions outside or inside a salary sacrifice arrangement to reduce their adjusted net income." The Child Benefit and adjusted net income guide goes through that effect, and is salary sacrifice worth it weighs the whole trade-off.
Can an AVC be paid by salary sacrifice?
Sometimes, and only where your scheme and employer allow it. The LGPS says of a Shared Cost AVC through salary sacrifice: "You do not pay tax or National Insurance contributions on the AVC contributions paid through a salary sacrifice arrangement." The employer's share is at the employer's discretion, and members are told to check whether their employer offers it.
The NHS rule is the opposite. For its money purchase AVCs, the NHSBSA says: "You cannot pay by salary sacrifice." One scheme's rule is not another's, so ask your own scheme and employer rather than assuming. A free-standing AVC, which you arrange with a provider of your choice, is separate again: the LGPS describes these as not linked to the scheme in any way.
Which route is open to you, and how it sits beside your State Pension and any benefits, is worth raising on the call-back an adviser makes after you have sent in this page's form. The value of an invested AVC pot can fall as well as rise, so you may get back less than you paid in. For the personal pension side, see salary sacrifice into a personal pension, and for whether extra payments pay off, are AVC pensions worth it.
Choosing between salary sacrifice and an AVC: your questions
Are pension AVCs salary sacrifice?
Not by definition. An AVC is extra saving, and salary sacrifice is one possible way of paying for it. Some schemes allow the combination and some, like the NHS money purchase AVC, do not.
Does the £2,000 cap from April 2029 apply to AVCs?
Only to an AVC paid by salary sacrifice, because the limit is on the National Insurance saving that route gives. An AVC deducted from your pay in the usual way has no National Insurance saving for the cap to touch.
Is there a limit on salary sacrifice and AVC payments together?
GOV.UK says you usually pay tax if pension savings go above 100% of your earnings in a year (the limit on tax relief) or £60,000 a year in 2026/27. Sacrificed pay counts as your employer's contribution; the annual allowance guide explains what counts.
Where do I check what is available to me?
Ask your employer about salary sacrifice and your pension scheme about AVCs. The LGPS tells members: "Contact your pension fund for more information about paying AVCs and how to start a contract." The payslip check on is my pension salary sacrifice shows whether you already use it.
Can I use both?
That depends on what your employer and scheme allow, and on how your scheme counts pensionable earnings. To have your pay and scheme looked at together, an adviser firm will phone you after you complete the short form here.