Bonus to Pension Conversion Calculator
Compare cash bonus vs pension contribution.
Compare taking a bonus as cash versus routing it into your pension to see the long-term wealth difference. Enter gross bonus and see the result instantly.
What this tool does
Companies often let you take a bonus as cash or contribute it to pension. Enter the bonus, your marginal rate, expected return, and years to retirement. The tool compares net cash value to pension future value.
Enter Values
Value is unusually high — please double-check
Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
A 10,000 bonus taken as cash at 42% combined tax leaves 5,800. The same 10,000 sacrificed to pension and grown at 5% for 20 years becomes 26,533 — almost 5× the cash equivalent before any drawdown tax. Even after retirement tax of 25-30%, the pension route usually wins for long horizons.
What the result means
Pension route is the future value of the gross bonus invested for the period. Cash route is the after-tax cash today. Compare both to your priorities — pension wealth at retirement vs cash now.
Quick example
With gross bonus of 10,000 and combined marginal rate of 42% (plus expected annual return of 5% and years to retirement of 20), the result is 26,532.98. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.
Which inputs matter most
You enter Gross Bonus, Combined Marginal Rate, Expected Annual Return, and Years to Retirement. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.
What's happening under the hood
Pension future value is gross bonus compounded at the supplied return for the years to retirement. Cash route applies the marginal rate to the gross. Drawdown tax in retirement is not netted off — apply separately if comparing net retirement income. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.
What the headline number hides
Gross pay, net pay, and what actually lands in your account can differ by thousands depending on tax code, benefits, pension contributions, and student loan deductions. This tool isolates one piece of that picture — always pair it with a take-home calculator for the full view.
What this doesn't capture
Tax bands, pension contributions, student-loan deductions, and benefits-in-kind sit outside this calculation. The figure is the headline; your actual position depends on local tax rules and personal circumstances. Pair with a dedicated take-home calculator for the full picture.
Pension route grows to the figure shown above; cash route shown for comparison.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
Pension future value is gross bonus compounded at the supplied return for the years to retirement. Cash route applies the marginal rate to the gross. Drawdown tax in retirement is not netted off — apply separately if comparing net retirement income.
References
Frequently Asked Questions
What about retirement tax?
Lifetime allowance risk?
Is cash ever better?
Employer NI rebate?
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