From Ros Altmann:economist and pensions,
    investment and retirement policy expert

  • pensionsandsavings.com

    One pension provider looking after low earners

    One pension provider looking after low earners

    13 September 2017

    • Government failing to recognise problem of low earners losing out in auto-enrolment
    • Companies using Net Pay schemes are not treating low earners fairly
    • Many low paid women are being forced to pay 25% more than they should for their pension
    • One pension provider is taking the moral high ground – Now:Pensions is paying these workers their tax relief

    I am delighted to see that Now:Pensions has confirmed it will give its low-paid customers the tax relief that is denied to them by current Treasury rules. The company is going to pay the tax relief that these low earners should be entitled to, but which the Government is denying them.

    Any worker earning under £11,000 last year was entitled to 20% tax relief (which amounts to a 25% Government bonus) on their pension contributions.  If their pension scheme operates on a Relief at Source basis they will have received the money. But if the pension provider chosen by their employer is administered on a Net Pay basis, then these low earners, mostly women, cannot get the 25% top-up. So many women and other low earners are forced to pay 25% more for their pension than they should.

    This scandal has been going on for a long time, but the Government has failed to address it.

    It is good to see one company taking the moral high ground.  Now:Pensions is a NetPay scheme, but it has chosen to give the extra money to its low earning customers from its own pocket. None of the other Net Pay schemes has been willing to ensure low earners do not lose out.

    Ideally, the Treasury needs to allow low earners to claim the tax relief they are entitled to. As auto-enrolment pension contributions are set to quadruple by 2019, the amount of money these low earners lose out on will increase sharply and more women will be denied the Government help they should have. This scandal needs to be urgently addressed and I hope the Treasury will take the matter more seriously as most of these low earners will be women, who are far more at risk of inadequate pensions than men.

    In the meantime it is good to see at least one company making a stand to improve women’s pensions and treat low earners fairly.

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