The government has said it will “examine the process for payment of pensions tax relief” in response to concerns low-paid workers in net pay schemes are losing out.
Addressing the House of Lords on Monday night, parliamentary under secretary of state for pensions Baroness Buscombe said the government wants to make the most of any new opportunities that emerge to make tax relief work better.
She added it is important that employers are free to choose a scheme that best suits the needs of their businesses and workers.
Reacting to the statement, AJ Bell senior analyst Tom Selby says: “Denying the lowest earning savers the tax relief they are due is clearly wrong and the government is right to consider solutions to deal with this specific problem.
“By raising the issue of pension tax relief reform, however, Baroness Buscombe will inevitably inflame concerns more radical changes could be pursued. Given the £20bn funding promise to the NHS made by the prime minister early this month, many now fear retirement savings incentives will be caught in the crossfire.”