Rishi Sunak has faced many calls to address certain economic difficulties in the upcoming March budget, chief among them being SEISS eligibility, furlough extensions and other forms of coronavirus support. However, today Now: Pensions called on the Chancellor to conclude the net pay review that was pushed in mid-2020.
This review was set to look into pension tax relief problems but as July arrived John Glen, the Economic secretary to the Treasury, detailed the pandemic had forced the Government to place the review on hold.
As he confirmed at the time: “At Budget 2020 the government announced a call for evidence will be published on pensions tax relief administration, in line with our manifesto commitment to comprehensively review this issue.
“In the light of Covid-19, the government is considering the publication of this and other government documents on a case by case basis, taking into account the impact of Covid-19 on stakeholders.”
The net pay anomaly itself results in lower earners not receiving a 20 percent boost on their pension contributions.
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Anyone paying higher tax rates may claim any further tax relief directly from HMRC.
If they don’t remember to do this they won’t get it, which is why many employers don’t like Relief at Source according to NOW: Pensions.
With the next budget around the corner, Adrian Boulding, the Director of Policy at NOW: Pensions, urged the Chancellor to take action: “[The] Government committed to look at this in last year’s budget and we now need to see action to help the lowest earners get better value for money on their pensions.
“Our research shows that the lowest income earners are missing out on up to £111m of Government tax relief every year.
“The issue affects workers who are auto enrolled into a net pay pension scheme because they earn more than £10,000 per year but are under the income tax threshold, currently £12,500.
“It affects more than a million people’s take-home pay, reducing it by up to £64 a year.
“It’s estimated that 75 percent of the people impacted are women in low-paid and part-time jobs.
“Women often work part-time in order to work around other duties such as childcare and this has been exacerbated over the past year of lockdowns.
“NOW: Pensions is the only net pay scheme to offer to top up the pension pots of its non-income tax paying members, but that isn’t a long-term solution.
“We are calling on the Government to conclude their review at this year’s Budget.”
Thus far, Rishi Sunak and the wider Government have refused to elaborate on what details will be revealed in the budget.
The only element known for sure is that the continuing pandemic will be addressed, as HM Treasury provided the following comments along with the budget announcement in December: “The budget will set out the next phase of the plan to tackle the virus and protect jobs and will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR).”
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