General Pensions News
HMRC’s pension taxation 6 March 2018
Henry Tapper, founder of Pension Playpen, writes about the unfairness of the new 19% Scottish taxpayer receiving 20% relief at source and the low earners in net pay schemes receiving 0% rather than 20% - recently highlighted in HMRC’s Pension schemes newsletter. And not to mention the auto-enrolment contribution increases, which he believes, do not give low earners an incentive to save.
Henry has written a Blog highlighting the different rules that HMRC has created. He writes:
“Members of pension schemes who get pension tax relief through the ‘net pay’ mechanism have their pension contributions deducted before income tax is applied to their pay, so only pay tax on what’s left. Pension tax relief on these contributions will continue to be given by default at members’ marginal rate of tax, including the new and newly increased Scottish rates. If you are the administrator of a pension scheme using the relief at source mechanism, you will continue to claim tax relief at the rate of 20% for members who are Scottish taxpayers. For pension scheme members who are Scottish taxpayers liable to income tax at no more than the Scottish starter rate of 19%, or who pay no tax, current tax rules will continue to apply. This means that scheme administrators will continue to claim relief at 20% in respect of these individuals, and HMRC will not recover the difference between the Scottish starter and Scottish basic rate. Pension scheme members who are Scottish taxpayers liable to income tax at the Scottish intermediate rate of 21% will be entitled to claim the additional 1% relief due on some or all of their contributions above the 20% tax relief paid to their scheme administrators. These pension scheme members will be able to claim the additional relief for 2018 to 2019 by contacting HMRC if they don’t already complete Self-Assessment returns, or through their return if they do. HMRC will engage with stakeholders to help affected members claim this additional tax relief. Pension scheme members who are Scottish taxpayers liable to income tax at the Scottish higher rate (41%) and Scottish top rate (46%) will be able to claim additional relief on their contributions up to their marginal rate of tax in the usual way, either in their Self-Assessment tax return or if they don’t complete a tax return by contacting HMRC.”
He goes on to say:
For hundreds of thousands of low-paid pension savers, (including a fair few Scots) the Treasury 1% simply won’t arrive. That’s because under net pay, the tax-relief members get is in line with their marginal rate of tax – 0%. Meanwhile, the Scottish low-paid in relief at source schemes get more than basic rate tax relief!”
You can read the full Blog here.
CIPP comment These are valid concerns and the CIPP has raised this issue with HMRC.
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Protecting Defined Benefit Pension Schemes 27 March 2018
The Department for Work and Pensions (DWP) has published a paper which explains how the government intends to increase the protections for defined benefit scheme members and make improvements to the system.
“A defined benefit pension is a promise made by the sponsoring employer to a scheme member that they will pay a predetermined level of pension, regardless of socio-economic factors.”
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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