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Now: Pensions in ‘catch 22’ over Govt tax relief stance

Ros Altmann

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.



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Er it did matter even before April as people below the trigger could and can still opt in? If there wasn’t clear sign posting that these people could be better off purchasing an IPP you could argue the scheme was facilitating poor outcomes for it’s members.

  2. I think it would be unlikely that the employer would pay into an IPP if they are running an AEThe net pay arrangement is the worst of both worlds for these individuals as they don’t get the NI saving either (unlike salary exchange which is dodgy as it risks pay below the National Minimum Wage).

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