The CIPP’s response to HM Treasury’s consultation: ‘Pensions tax relief administration: call for evidence’

13 October 2020

HM Treasury published a consultation that ran from July to October 2020 that wanted to explore how two of the main methods of administering pensions tax relief work, and to seek feedback on how improvements could potentially be made. The CIPP’s Policy and research team, having collated the views and opinions of payroll professionals through a survey and a virtual thinktank roundtable, has submitted its response, which can be located here.

The call for evidence was initially announced in March 2020, within the Budget, and its aim was to address the issue of how a low-earning individual’s net pay could potentially be affected solely on the basis of how pensions tax relief is provided through their pension scheme.

In relief at source arrangements, pension contributions are taken from net pay, and the pension provider reclaims tax relief from HMRC, ensuring that individuals enrolled in pension schemes of that type receive pensions tax relief. In a net pay arrangement, however, pension contributions are deducted from gross pay. The current tax threshold is £12,500, whilst the auto-enrolment threshold is for earnings above £10,000, so anyone earning between those two amounts will not receive the pensions tax relief that they would if they had been in a relief at source pension scheme.

To address the issue, the consultation sought feedback on how successful four different potential approaches could be. Amongst the key findings were:

  • Respondents to the survey confirmed that within their businesses:
    • 25% operate a NPA scheme
    • 24% operate via a RAS
    • 41% operate both NPA and RAS

                 The majority of members that attended the virtual roundtable event also confirmed that salary sacrifice                                     pension schemes were also offered within their businesses

  • In terms of the approach that survey respondents felt should be taken to resolve the issue:
    • 35% favoured approach one – the payment of a bonus
    • 0% felt that approach two – applying a standalone charge to RAS schemes would be most effective
    • 30% showed preference for approach three – the operation of multiple schemes
    • 35% felt that mandating the use of RAS for DC schemes would work best

The CIPP’s response discussed member feedback from the survey and the virtual meeting, and the pros and cons of each proposed method of resolving the issue. It can be accessed in its entirety here.


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