Workers in Birmingham and London most likely to use their bonus to boost their retirement

Published  13 March 2024
   3 min read
  • Almost half (44%) of workers who received a bonus last year paid some or all of it into their pension
  • This rises to three fifths (57%) when looking at workers in Birmingham, who were most likely to invest their bonus for the future
  • Opting to pay your bonus into your pension through bonus sacrifice could save you tax

New research from Royal London, the UK’s largest mutual pensions and investment provider, identifies the parts of the UK where workers are most likely to use bonus payments to boost their pension. The research shows that those living in and near Birmingham, London, and Edinburgh were most likely to pay some, or all of their bonus into their pension, with those living near Bristol and Norwich the least likely to do this1.

Top cities for number of people contributing bonus to pensions
1. London 57%
2. Birmingham 49%
3. Edinburgh 46%
4. Glasgow 40%
5. Manchester 38%

As we approach the end of the 2023-24 tax year, those UK workers lucky enough to receive a bonus may need to consider how to make the best use of the extra money. The majority of workers who pay into a pension (58%), were paid a bonus last year, according to the research, with those aged 18-34 the most likely to receive one (68%).

Four in ten people who received a bonus, and have a pension, paid some or all of it into their pension, with almost a quarter (23%) investing at least half of their bonus and just over one in ten (11%) putting all of it into their pension.

Those aged 18-34 were the most likely to invest some or all of their bonus into their pension (60%), with more than two thirds (68%) of men in this age bracket investing at least some of their bonus in their pension compared to half (50%) of women the same age. However, more than a third (35%) of men aged 18-34 invested more than half of their bonus into their pension compared with a quarter of women the same age (26%).

There was a marked geographical difference in the likelihood of people to invest any of their bonus in their pension. Those living near or in Birmingham were the most likely to choose to invest their bonus with almost three fifths (57%) taking that option, with those living near Bristol the least likely to do this.

Sarah Pennells, Consumer Finance Specialist at Royal London, said:

"Not everyone will receive a bonus and, for those who do, it may be tempting to spend it straight away. However, you could have 20 or more years in retirement and our research shows that only four in ten people feel like they are saving enough for their retirement2. So, it’s worth considering how you can best use this hard-earned money to make sure it works as hard for you in turn.

"Times are still pretty tough for many people; while some prices are falling or, at least, not rising as fast as they were previously, others remain stubbornly high. So, any bonus may go on day-to-day living costs, to build up emergency savings or on a treat. Or you may have earmarked it for something else, like home improvements.

"But those choosing to put some, or all, of your bonus into your pension could not only boost the amount in your pension pot, but also save tax if your employer offers bonus sacrifice or bonus exchange. With bonus exchange you decide how much of your bonus you’d like to exchange for contributions into your pension before you receive your bonus, and your employer pays that money straight into your workplace pension. This can save you tax as you don’t pay tax or national insurance on the money going into your pension, whereas it would be taxed if it was paid into your bank account as a lump sum. Bonus sacrifice can only be used on newer style defined contribution pensions, but it can be a particularly useful option for anyone who might be pushed into a higher tax bracket by their bonus payment3.

"There definitely isn’t a right or wrong way to treat your bonus if you receive one, but, while investment returns are never guaranteed, your bonus could be worth more in the longer run if you choose to invest it in your pension rather than spend it, and sacrificing your bonus into your pension is a savvy way to save on tax."

For more information visit: What is salary sacrifice and bonus sacrifice - Royal London

Notes to editor

  1. Opinium research commissioned by Royal London 5th - 11th December 2023 with a nationally representative sample of 4,000 UK adults. Of these, 1,884 had a pension and 1,086 had a pension and received a bonus.
  2. Opinium research commissioned by Royal London 1st - 8th August 2023 with a nationally representative sample of 6,000 UK adults. Of these, 4,630 had a pension.
  3. Example of bonus exchange
Salary £45,000
Bonus £5,000 £5,000
£5k Bonus Bonus paid Bonus Exchange
Tax at 20% £7,486 £6,343
NI £3,743 £3,171
Take home pay £38,771 £34,771
Difference in take home £4,000
Added pension contribution N/A £6,502.86

If we look at an example of an employee earning £45k with a £5k bonus. After tax at 20% and national insurance on £50,000 has been deducted, the employee’s annual pay would be £38,771. However, if that £5,000 bonus was paid into their pension through bonus exchange they would have less annual pay by £4,000 however they would add £6,502.86 to their pension.  

Also, all of the employer national insurance saving has been passed onto the employee.

For further information please contact:

Nicki Parry, PR Manager

About Royal London

Royal London is the largest mutual life, pensions and investment company in the UK, and in the top 25 mutuals globally, with assets under management of £162 billion, 8.6 million policies in force and over 4,200 employees. Figures quoted are as at 31 December 2023. Learn more at