have a full pension deduction taken from their pay, without receiving any tax benefit on this contribution as they have not earned enough for tax to be applied to their earnings. If an individual is in a relief at source arrangement, however, they would only have 80% of the contribution deducted from their net pay, which would subsequently be topped up with 20% from HMRC, meaning that they would enjoy the benefit of tax relief. The government is concerned about the possible impact of this on a low-earning individual’s take-home pay, based on the method of pensions tax relief that is operated by the pension scheme that they are enrolled in. Intentions for the government to look into this were made clear in the Conservative manifesto 2019, which stated: “A number of workers, disproportionately women, who earn between £10,000 and £12,500 have been missing out on pension benefits because of a loophole affecting people with net pay pension schemes. We will conduct a comprehensive review to look at how to fix this issue.” The call for evidence aims to discuss improvements that can be made to the methods of administering pensions tax relief. Within the survey, we ask for your feedback on the government’s proposed methods of fixing the pensions anomaly issue. This is an important topic for payroll and pension professionals to have their say on, so although we understand you are all very busy, we would really appreciate any time you can dedicate to respond to the survey. It should take approximately 20 minutes to complete, and the survey will be open until 30 September 2020.
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State pension will still be subject to ‘triple lock’ increase for 2021 -22 24 September 2020
The government has introduced a Bill into Parliament which ensures that the state pension will increase in tax year 2020-21, and that the ‘triple lock’ will be maintained.
The ‘triple lock’ means that, where earnings increase, the state pension will increase by whichever is highest of the following:
Price inflation
• • •
Earnings growth
2.5%
A technical detail within current rules means that if earnings growth is negative, then the state pension will not increase, regardless of price inflation, which would also mean that the 2.5% increase would not be applied. The new Bill has been drawn up to ensure that this detail does not lead to a freeze on the amount of state pension that is made available next tax year, as it is predicted that earnings growth will be negative, as a result of the coronavirus crisis and employees being placed on furlough only receiving 80% of their standard pay.
The fact that the ‘triple lock’ has not been scrapped is in line with one of the key manifesto pledges of the Conservative party’s 2019 manifesto, which stated:
“On entering Government in 2010, the Conservatives acted decisively to protect the UK’s pensioners. The ‘triple lock’ we introduced has meant that those who have worked hard and put in for decades can be confident that the state will be there to support them when they need it. We will keep the triple lock…….. ensuring that older people have the security and dignity they deserve.” Recently, speculation has been rife that Chancellor, Rishi Sunak, was intending to get rid of the ‘triple lock’ due to worries that it would soon become unaffordable, and unrealistic to offer. The introduction of the Bill today confirms that there are no such plans at this moment in time.
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HMRC Pension Schemes Newsletter 124 1 October 2020
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
Page 546 of 590
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