Ndubuisi 'Andy' EgwimMoney Coach for Medics|Ex-NHS GP|21+ Yrs Investor| Founder, MoneyWiseDoctor.com|Helping Medics Avoid Big Money Mistakes

Why £20K Becomes £25K in Your Pension

27 Feb 2026 · 1 min

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In this short explanatory monologue, the speaker clarifies how a £20,000 net contribution to a private pension is treated as a £25,000 gross contribution because of the UK’s 20% tax relief on pension contributions. He walks through the calculation: the government assumes the £20,000 was originally £25,000 before tax, then applies a 20% tax charge (equivalent to £5,000) to arrive back at the net £20,000. The example uses a fictional person named Chimex to illustrate the process and to dispel confusion about the relationship between gross and net amounts in pension tax relief.

Chapters

Now don't be confused. If I say 20k and 20, I say 25. Don't be confused about it. It's 20 of the gross which is equal to 25% of the net. Again, I'll give you an example. If you've put in £20,000, the government comes in and says, look, Chimex, you put in 20,000 in your private pension. We've taxed you on this money already because this money is coming out of your pocket. We shouldn't have taxed in the first instance. So here, Chimex, take your money back. So what they are doing is actually they are going to give you 25 of the 20k put into your pension. But they are not looking at it as 20k. They are looking at it as this money was originally 25, 000. I'll take a bite out of it. We took 5,000 out of it, so now we're going that 5,000 it took out was 20%.