Question to the HM Treasury:
To ask Her Majesty's Government what estimate they have made of the amount of tax relief forgone in net pay pension schemes by workers earning below the personal tax threshold while contributing to workplace pensions in the past three tax years.
Members of net pay pension schemes receive tax relief on their pension contributions at their marginal rate as these contributions are deducted before tax is calculated. Those individuals with income below the personal tax threshold do not pay tax.
Members of relief at source pension schemes, however, receive a 20% basic rate top up on their pension contribution, even though they do not pay tax.
The Economic Secretary to the Treasury provided the Work and Pensions committee an estimate of the cost of providing the same type of top-up as exist for those in relief at source scheme to those in net pay schemes. This estimate was around £100m per tax year.