Occupational Pensions: Tax Allowances

(asked on 20th March 2017) - View Source

Question to the HM Treasury:

To ask Her Majesty’s Government what assessment they have made of the challenges faced by low earners whose employers use a net pay arrangement pension scheme which denies them the tax relief they would receive in a relief at source scheme.


Answered by
Baroness Neville-Rolfe Portrait
Baroness Neville-Rolfe
Minister of State (Cabinet Office)
This question was answered on 3rd April 2017

Tax relief is granted on contributions to all registered pension schemes, including workplace pensions. This relief can be provided for through two mechanisms: net pay or relief at source.

Where a scheme operates the net pay mechanism, contributions are deducted from pay before any tax is applied. This approach applies to all members of the scheme including those earning (1) between £10,000 and £11,000 a year from their employer, and (2) below £10,000 a year from one or more employers. The pension provision would depend on these contributions as well as those made by the employer.

The Government appreciates the impacts on low paid workers whose employers use a net pay arrangement pension scheme. 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.

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