Now: Pensions says it is caught in a “catch 22” after the pensions minister warned employers against its chosen tax relief model.
This week Ros Altmann wrote to The Pensions Regulator asking it to warn employers that providers using a ‘net pay’ arrangement do not allow people earning under £10,600 to claim tax relief on their contributions.
The majority of occupational schemes, including Now: Pensions, use net pay.
Now: Pensions chief executive Morten Nilsson says: “With the tax relief consultation ongoing, we find ourselves in a catch 22 situation. Ultimately, if the only way savers can be guaranteed to receive the tax relief they are entitled to is to move to a relief at source arrangement, we will make this change.
“But this is a major undertaking and we feel unable to make this decision until we have some surety from the Government around the future of tax relief.”
It did not matter which model was used until April, when the nil-rate tax band was increased while the auto-enrolment earnings trigger remains at £10,000. But now people earning above the trigger but below the starting rate of tax could lose out.
Government-backed scheme Nest uses the alternative ‘relief at source’ model, while the People’s Pension give employers the option of either model.