Corporate Adviser
  • Content Hubs
  • Magazine
  • Alerts
  • Events
  • Video
    • Master Trust Conference 2024 videos
  • Research & Guides
  • About
  • Contact
  • Home
  • News
  • In Depth
  • Profile
  • Pensions
    • Auto-enrolment
    • DB
    • DC
    • Defaults
    • Investment
    • Master Trusts
    • Sipps & SSAS
    • Taxation
  • Group Risk
    • Group Life
    • Group IP
    • Group CIC
    • Mental Health
    • Rehab
    • Wellbeing
  • Healthcare
    • Musculoskeletal
    • Mental Health
    • IPT
    • Wellbeing
    • Trusts
    • Cash Plans
  • Wellbeing
    • Mental Health
    • Health & Wellbeing
    • Financial resilience
  • ESG
No Result
View All Result
Corporate Adviser
No Result
View All Result

Treasury tackles pension ‘anomaly’ to help lower paid workers

Government confirms it will look again at pension tax relief rules for net-pay schemes

by Emma Simon
October 10, 2018
Share on FacebookShare on TwitterShare on LinkedInShare on Pinterest

HM Treasury has confirmed it is looking to tackle anomolies in the auto-enrolment system which has seen up to one million low-earners miss out on tax relief.

Its statement, which says it is “exploring opportunities” to redress this problem, was welcomed by the pensions industry.

This problem has arisen because of the difference in the way pension tax relief rules are applied on net-pay and relief-at-source schemes.

Workers whose annual salary is less than the personal allowance (currently £11,500 a year) but who are automatically enrolled into a pension do not get the 20 per cent tax relief if they are in a net-pay scheme.

However under a relief-at-source scheme pension contributions are deducted after tax is paid, and HMRC sends tax relief back to the scheme at the basic rate of 20 per cent, which is added to employees’ savings.

Non-taxpayers can claim tax relief on pension contributions up to £3,600 a year.

Many of the largest master trust pensions in the UK, used for auto-enrolment, are net-pay schemes.

Aegon’s head of pensions Kate Smith says: “We are pleased to see that the Treasury is working to address the imbalance which means that at present over a million low earning individuals are missing out on Government top-ups on their pension contributions.

“It is unfair that those earning less than the personal income tax allowance currently miss out on tax relief.”

She adds: “Government should act quickly as the ‘net pay’ anomaly is set to rise further as the minimum auto-enrolment contributions are due to increase in April. By taking action now the Government will avoid even more individuals missing out on the government contributions they should be entitled to.”

She adds that if this issue is not address it could potentially undermine the auto-enrolment programme.

A recent freedom of information request carried out by Aegon shows that there were 11 million employees earning less than the personal income tax allowance in 2016/17 where the allowance was £11,000pa – this is for all jobs.

Hymans Robertson’s head of scheme design and provider evaluation, Jesal Mistry says: “Over the last five years the industry has watched master trusts evolve from being a relatively niche option serving the needs of smaller employers, to today where they are increasingly seen as the DC vehicle of choice.

“They have grown to represent over 35 per cent of the workplace savings market and account for the savings of over 7m DC scheme members in the UK.

“The fact that only three of the Master Trusts we surveyed offered tax relief at source is not just surprising but a major concern as it could mean thousands of individuals auto-enrolled are not receiving the tax relief they were promised.”

VIDEO

Corporate Adviser Special Report

REQUEST YOUR COPY

Most Popular

  • laptop-keyboard-hands-elderly-pensioner-700.jpg

    Barnett Waddingham connects first client to dashboard

  • Ros Altmann: Link tax relief to higher allocations to UK investments

  • TPT first provider to confirm CDC plans

  • Rapid asset growth sees 9 providers pass £25bn mark: CA Master Trust and GPP Defaults report

  • Aviva appoints Noon as Master Trust chair

  • Aviva and Age UK call for ‘mid-retirement’ MOT to stop people outliving pension savings

Corporate Adviser

© 2017-2024 Definite Article Media Limited. Design by 71 Media Limited.

  • About
  • Advertise
  • Privacy policy
  • T&Cs
  • Contact

Follow Us

X
No Result
View All Result
  • Home
  • News
  • In Depth
  • Profile
  • Pensions
    • Auto-enrolment
    • DB
    • DC
    • Defaults
    • Investment
    • Master Trusts
    • Sipps & SSAS
    • Taxation
  • Group Risk
    • Group Life
    • Group IP
    • Group CIC
    • Mental Health
    • Rehab
    • Wellbeing
  • Healthcare
    • Musculoskeletal
    • Mental Health
    • IPT
    • Wellbeing
    • Trusts
    • Cash Plans
  • Wellbeing
    • Mental Health
    • Health & Wellbeing
    • Financial resilience
  • ESG

No Result
View All Result
  • Home
  • News
  • In Depth
  • Profile
  • Pensions
    • Auto-enrolment
    • DB
    • DC
    • Defaults
    • Investment
    • Master Trusts
    • Sipps & SSAS
    • Taxation
  • Group Risk
    • Group Life
    • Group IP
    • Group CIC
    • Mental Health
    • Rehab
    • Wellbeing
  • Healthcare
    • Musculoskeletal
    • Mental Health
    • IPT
    • Wellbeing
    • Trusts
    • Cash Plans
  • Wellbeing
    • Mental Health
    • Health & Wellbeing
    • Financial resilience
  • ESG

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.