Investment - Articles - Pensions can help HENRYs take control


Growing numbers of HENRYs – High Earners, Not Yet Rich - are finding six-figure salaries don’t stretch as far as expected. With less than six months to go until tax year end, Standard Life outlines how high earners can utilise their pension to protect more of their income

 Earning a six-figure salary may seem like you’re quids in and in an enviable position when compared to many, but for so-called HENRYs – a term that has been coined to describe those who are High Earners but Not Rich Yet - a £100,000+ wage isn’t stretching as far as expected. Faced with frozen 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 – but pension saving can provide the key to ensuring more of this income is protected for the future.
 
 The tax implications for HENRYs can feel particularly punitive. Once someone earns more than £100,000, they begin to lose their tax-free personal allowance of £12,570. This means that, for every £2 earned over the limit, £1 is lost from the personal allowance, until it is completely lost by the time £125,140 is earned. As a result, HENRYs earning between £100,000 and £125,140 face a marginal income tax rate of 60% and therefore see much less of their six-figure salary in their pay packet.
 
 Such a tax hit will feel demoralising, however there are a number of measures HENRY’s can consider to protect more of their income. With there now less than six months until the end of the 2025 tax year, Standard Life, part of Phoenix Group, outlines a number of ways that HENRYs can ensure less money is taken by the taxman and more can be kept for later life.
 
 Mike Ambery, Retirement Savings Director at Standard Life comments: “Crossing the six-figure salary mark is undoubtedly a strong income position, but without careful financial planning, some higher earners still won’t feel financially secure. 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.
 
 Dean Butler outlines his top tips for HENRYs looking to protect their income:
 
 1. Claim extra pension tax relief
 “UK taxpayers are entitled to tax relief on their pension contributions based on the rate of income tax they pay, with most receiving a 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. 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. It’s a simple step that can make a big difference to your long-term savings.”
 
 2. Paying into your pension to recover your tax-free personal allowance
 “Your personal allowance, the first £12,570 of income that’s tax free, starts to taper once your income exceeds £100,000, reducing by £1 for every £2 earned over that threshold. It disappears entirely at £125,140 of income. That means earnings in this band face a 60% effective marginal tax rate, even before National Insurance. By making a gross pension contribution that brings your adjusted net income back below £100,000, you not only save higher rate tax on that amount, but you also regain your personal allowance – effectively receiving 60% tax relief on the contribution. For those using salary sacrifice, the combined tax and National Insurance savings can push the overall benefit even higher – up to 67%. This means a £100 pension contribution will effectively only cost the saver £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.”
 
 3. Consider salary sacrifice
 “Salary sacrifice allows you to reduce your gross salary in exchange for non-cash benefits, such as pension contributions, which can cut both income tax and National Insurance. It can be particularly valuable for those earning between £100,000 and £125,140 – the band where the personal allowance is gradually withdrawn, creating a 60% effective marginal tax rate. By lowering your adjusted net income, salary sacrifice can help you preserve this allowance and reduce overall tax. In addition to 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. However, not all employers offer these schemes, and they may affect entitlements like mortgage applications or statutory pay, so it’s worth checking the details. Where available, salary sacrifice can be a highly efficient way to align your spending with your financial goals while keeping more of your income working for the long term.”
 
 4. Increase your pension contributions to keep more of your child benefit
 “Some HENRYs might be putting off having children or expanding their families due to the financial strain that comes with higher earnings. 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.”
  

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