High earners often lose more than half of their annual bonus to tax. In this case study, we show how a 59-year-old senior high earner used pension planning and salary sacrifice to reduce tax on a £40,000 bonus and fully fund his retirement.
Frustration:
“I get a £40k bonus every year… and it feels like the tax man takes almost all of it.”
David came to Strive feeling fed up. He’d worked hard, earned well, and every year his bonus pushed him deep into the 45% tax bracket. After tax, NI, and the loss of personal allowance, his effective tax rate was well over 50%.
He told us:
“What’s the point of a bonus if I never see it?”
Client Profile
Name: David (age 59)
Occupation: Senior Operations Director
Income:
• £135,000 salary
• £40,000 annual bonus (consistent)
Retirement Goal:
• Retire at 65
What We Did
1. Analysed his bonus and tax position
We showed David exactly what was happening:
His £40,000 bonus was costing him:
• 45% income tax
• 2% NI
• Loss of personal allowance
Net result: He kept around £21,000.
More than half was lost immediately.
2. Redirecting the bonus into his pension — paying zero tax
We structured his bonus to be paid directly into his pension instead of his payslip.
This meant:
• No income tax
• No NI
• No loss of personal allowance
• Every £1 of bonus becomes £1 of pension
Result:
The full £40,000 went into his pension instead of just £21,200 into his bank.
He effectively doubled what he kept.
3. Asking his employer to pass on NI savings
We advised David to ask his employer to pass on their National Insurance savings through salary sacrifice.
Employers save 13.8% NI on sacrificed bonuses.
Many will pass part, or all of this on as an additional pension contribution (until 2029!).
In David’s case, his employer agreed to pass on the full saving.
This added:
• An extra £5,520 into his pension every year.
• Completely free of tax
4. Building a Retirement Plan to Age 65
We then used cashflow modelling to show:
• How much his pension would grow with the new contributions
• What income he could take safely from 65 onwards
• The long-term impact of avoiding bonus tax
• How to phase into retirement smoothly
The Result
✓ David now keeps the full value of his bonus — not half of it.
✓ £40,000 + £5,520 NI saving = £45,520 into pension each year, on top of his usual contributions.
✓ His retirement at 65 is now fully funded.
✓ He feels in control rather than frustrated every bonus season.
Your Next Step
If you’re a high earner losing most of your bonus to tax, we can show you how to keep significantly more — and use it to fund the retirement you actually want.
Book your free call with Strive Financial Planning.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
Important Considerations:
While this strategy was highly beneficial for David, it isn’t without limitations. High earners must consider the Tapered Annual Allowance and the risk of breaching contribution limits. Pension contributions are also locked away until minimum pension age, so they’re not suitable for short-term access. In addition, although the Lifetime Allowance has been removed, tax-free lump-sum and death-benefit limits still apply. Finally, current employer NI savings (13.8%) are due to be capped at £2,000 per year from 2029, meaning future savings may be lower than what David achieved.
