Roughly 1.75m workers missing out on tax relief – Royal London

Roughly 1.75 million workers could be missing up to £60m a year in tax relief, a Royal London freedom of information (FOI) request has found.

The number is around half a million more than previously thought as the income tax threshold rose from £11,000 to £12,500 a year, while the auto-enrolment threshold remained at £10,000.

Last week, the Work and Pensions Select Committee questioned Department for Work and Pensions' Ministers on the issue, but said that they “did not know” how many workers were effected.

Royal London director of policy, Steve Webb, said: “It is a scandal that so many low-paid and part-time workers are missing out on tax relief on their pension contributions. This is the group that most needs a boost to their pension savings.

“These new figures suggest that the scale of the problem is much bigger than previously thought. It is simply not good enough for ministers to say that it is not cost-effective to deal with this problem.”

Ministers told the committee that the average worker would be missing out on £35 per year, amounting to roughly £60m for the 1.75 million thought to be missing out.

However, research from Now Pensions last year found that individuals could be missing out on as much as £64 per year, suggesting the total figure could be much more.

According to the mutual insurer, around three quarters of the workers are women in low-paid or part-time work.

The issue stems from workers whose employers have chosen a Group Personal Pension arrangement, which benefits from a relief at source method, while workers in most trust-based occupational schemes get no tax relief.

Last October, the government rejected calls from the Treasury Committee to fundamentally reform pensions tax relief after it said there was “no clear consensus” to do so.

In its response, the government said that any changes to the regime could have "significant impacts for pension schemes, employers and individuals".

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