Occupational Pensions

(asked on 23rd January 2017) - View Source

Question to the HM Treasury:

To ask Her Majesty’s Government what measures they will introduce to enable workers earning under £11,000 a year to reclaim the 25 per cent government bonus that they are currently unable to receive when contributing to a net pay scheme, which they would be entitled to were they contributing to a relief at source scheme.


Answered by
Baroness Neville-Rolfe Portrait
Baroness Neville-Rolfe
Minister of State (Cabinet Office)
This question was answered on 6th February 2017

The Pensions Regulator (tPR) provides guidance to employers on choosing a pension scheme for their staff in order to discharge their statutory obligations under automatic enrolment. This guidance covers the choice between net pay and relief at source schemes, and the implications of net pay schemes for employees who do not pay tax. All employers, including public sector employers, are expected to follow tPR’s guidance about providing their employees with relevant information on the arrangements for tax relief.

The Government appreciates the concerns for low paid workers enrolled in net pay schemes. However, it has not been possible to identify any straightforward or proportionate means to align the effects of the net pay and relief at source mechanisms more closely for this population. In particular, it is not possible to know an individual’s final earnings until after the end of the tax year. While employers will know an employee’s salary from a single job, neither employers nor pension schemes are currently required to know whether an employee also has alternative sources of income. Requiring them to gather this information would create a disproportionate burden, and many employees may not wish to share this information with their employer.

The Government does not therefore plan to oblige employers to reimburse their low paid employees if they are enrolled in net pay schemes, as this would not be possible to implement effectively.

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