The government is set to take a close look at the current pension tax relief system, the parliamentary under-secretary of state for the Department for Work and Pensions revealed in a recent speech to the House of Lords.
According to Professional Pensions, Baroness Buscombe, the parliamentary under-secretary of state for the Department for Work and Pensions said the government could overhaul the system it if felt it was beneficial to do so. She said: "Alongside further work on the automatic-enrolment changes outlined in the review, the government will examine the processes for payment of pensions tax relief for individuals to explore the current difference in treatment to ensure we can make the most of any new opportunities that emerge, balancing simplicity, fairness and practicality while engaging with stakeholders to seek their views.” Currently, under the net payment system, which is handled through an employer's payroll, those earning less than the taxable employment threshold of £11,850 do not receive tax relief on their pension contributions. Those earning enough to qualify them to be a higher-rate taxpayer automatically have an additional 20% tax relief added on. An individual in a relief at source scheme, however, which includes people paying into a personal or group personal pension or a self-invested personal pension, automatically receives tax relief of 20%, even if they are earning less than the £11,850 threshold. Individuals in the higher-rate bracket risk missing out, however, on a further 20% of tax relief under the relief at source system if they are unaware they have to fill in a box on their tax return, as the additional 20% relief is not automatically applied.
Now Pensions director of policy Adrian Boulding said the current set-up caused "ill-will in the market", with one system appearing to disadvantage low-earners, and one appearing to disadvantage high-earners.
Read the full news item from Professional Pensions.
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Countdown bulletin 35 – June 2018 2 July 2018
This publication provides important guidance and information to pension scheme administrators about the end of contracting-out, which although came to an end in April 2016 schemes are still submitting termination and transfer notices with end dates on or after 6 April 2016.
These bulletins provide important updates for pension scheme administrators to enable them to make sure all individual’s contracted out pension rights are secured correctly.
Countdown bulletin 35 contains updates on:
• Scheme Cessation guidance for Pension Scheme Administrators (PSAs) • New automated solution for 2R local authority schemes liability part period • New automated solution for change of Responsible Paying Authority (RPA) • Guaranteed Minimum Pension (GMP) checker
Previous editions of the Countdown Bulletin are also available on GOV.UK.
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Payroll: need to know
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