Government urged to end pension inequality

With people on low incomes charged 25% more for their pension contributions due to the way their employer’s pensions schemes operate, the LITRG is urging the government to take action.

There are an estimated 1.5 to 1.75 million people impacted by this and most of them are women, and so alongside other members of the Net Pay Action Group, the Low Incomes Tax Reform Group (LITRG) is proposing that HMRC reimburse the tax relief that affected individuals have missed out on.

The LITRG suggests that HMRC could take data they already receive from employers to work out the amount due.

Victoria Todd, Head of LITRG, said, “Action must be taken to ensure all low-income workers get a government contribution to their pension, as was promised under auto-enrolment. Currently an estimated 1.5 to 1.75 million people miss out – three-quarters of whom are women.”

“The numbers affected will only grow as auto-enrolment is extended to 18-year-olds and the lower earnings limit is removed. Failure to act could damage confidence in pensions and auto-enrolment.

“We believe the call for evidence misrepresents the impacts of our proposal. The additional administrative burdens indicated in that paper are either mistaken or over-stated.

“While we recognise that our proposal adds some complexity, it is important to balance the oftentimes competing objectives for the tax system. In this case, we believe that some complexity is a reasonable price to pay to fix the inequality.”

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