Kate Smith, head of pensions at Aegon: “We’re delighted that the government is finally looking to address one of the greatest injustices in the pensions tax relief system. Low earners, mainly women, who are saving in pension schemes which use net pay schemes to administer pension tax relief are not receiving the 20% tax relief on their pension contributions to which they are entitled.
“Had they been saving in a scheme which used ‘relief at source’ to administer pension tax relief they would have received this government top-up and had more in their take-home pay. This is a growing problem as more non-taxpayers are being auto enrolled into a workplace pensions scheme and not always benefiting from the top-up. It’s important that this group is treated equally and fairly, regardless of how tax relief is administered. Having this, could make the difference for people to decide to keep on saving, or to opt out of their workplace pension scheme.
“Although the consultation has been a long-time coming any solutions needs to be simple for savers to understand and easy and inexpensive for employers, providers and the government to administer. It may take a while to square this circle.”
Lizzy Holliday, Head of DC, Master Trusts & Lifetime Savings, PLSA, said: The publication today by the Government of a call for evidence on the net pay/relief at source issue shows long overdue progress towards fixing the tax anomaly that is leaving 1.75 million of the lowest paid pension savers in ‘net pay arrangements’ worse off. On the minimum auto-enrolment contributions, those affected are losing up to a total of £63 a year each, and in many schemes it can be at least double this figure. Of the affected population, over 75% are female.”
“The PLSA has long advocated for the ‘P800’ solution using Real Time Information (RTI) data – as the best option to addresses the issue and we will continue to engage with Government regarding the barriers they have posed – action is needed on this matter.”
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