HMT confirms 'no plans' to include automatic pension facility in digital tax initiative

HM Treasury (HMT) has confirmed that there are currently no plans to introduce a facility for automatic enrolment into pensions as part of the Making Tax Digital (MTD) initiative, despite suggestions that this could encourage pension saving among the self-employed.

The Work and Pensions Committee recently asked HMT for an update on MTD work, after Pensions Minister, Guy Opperman, previously told the committee that “default is the only way to get big interventions”.

At the hearing, Opperman suggested that the chance to do this would be “when HMRC has fully constructed MTD and you are in a situation where there is an automatic deduction from your earnings into an automatic enrolled pot by reason of your tax return, effectively”.

However, responding to the committee's query, Economic Secretary to HMT, Richard Fuller, confirmed that the HMT has “no current plans to introduce a facility for automatic enrolment into pensions as part of MTD delivery”.

In addition to this, while there have been suggestions to increase Class 4 NICs with the increased amount being diverted into a pension scheme. Fuller argued that it “would not be appropriate to raise Class 4 national insurance contributions (NIC) at this time”.

He also addressed queries as to whether HMRC has considered using NICs as a basis for conducting automatic enrolment for the self-employed, instead of Income Tax, confirming that HMRC is not actively considering automatically enrolling the self-employed via the NICs system

“HMRC systems are not designed to collect or administer pension contributions; it would present a significant challenge as new ones would be required,” he stated.

“This would prove to be difficult at a time where the government is already delivering major projects to modernise the administration of tax and pension savings.”

However, Fuller emphasised that the government does recognise the importance of encouraging self-employed people to contribute to their pensions, which is why the it provides tax relief on pension contributions.

Fuller reiterated previous comments from his predecessor, confirming that DWP are working with HMRC to explore opportunities presented through MTD and software suppliers.

As part of this, HMRC undertook a trial with the Money and pensions Service between October 2021 and February 2022, which signposted those self-employed who were not currently paying into a pension or annuity, to the MoneyHelper website for free impartial guidance.

In addition to this, DWP are working with Nest Insight and a range of partners to test different approaches and interventions aimed at improving retirement saving for the self-employed, with analysis of these trials expected "later this year".

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