View more on these topics

Pensions minister under fire over tax relief stance

Ros Altmann

Auto-enrolment provider Now: Pensions has hit out at pensions minister Ros Altmann after she publicly backed the ‘relief at source’ model of distributing pensions tax relief.

Pension schemes either operate on a relief at source or net pay model. In the former contributions are taken from members’ salaries after tax, with non-taxpayers receiving relief at 20 per cent.

The difference is then claimed back from HMRC.

Under net pay, contributions are deducted before tax, however non-taxpayers receive no tax relief at all.

Trust-based schemes, such as Now: Pensions or the Tesco staff pension plan, use this model.

It did not matter which model was used until April 2015, when the nil-rate tax band was increased while the auto-enrolment earnings trigger remain at £10,000. However, now people earning above the trigger but below the starting rate of tax could potentially lose out.

In July, Altmann tweeted: “I want employers to choose auto-enrolment pension schemes that offer relief at source, not a net pay arrangement, so low earners get tax relief due.”

But Now: Pensions chief executive Morten Nilsson says: “In the absence of a crystal ball, declaring that schemes operating on a relief at source basis will be the best option for employers with low paid workers seems presumptuous.

“It’s also questionable whether HMRC could cope if all schemes moved to a relief at source basis and it seems to be a very inefficient way of giving people tax relief.”

He adds that employees earning less than £18,000 qualify for a reduced administration charge, which “more than offsets the tax relief that a handful of members might be missing out on”.

The People’s Pension offers employers a choice of either systems but wants the Government to settle on one.

Director of policy and market engagement Darren Philp says: “We think relief at source offers the simplest option for the lowest earners – the very people auto-enrolment is intended to support.

“As the gap between the personal tax allowance and the earnings trigger for auto-enrolment grows, the number of savers losing the benefit of tax relief will grow.

“At The People’s Pension, we offer employers the option of either net pay or relief at source so that they can choose the method that works best for their employees.

“Having two methods of tax relief is neither simple nor transparent, and there is a real risk that it obscures one of the key benefits of pension saving. As the Treasury is currently looking at the future of tax relief there is an opportunity to simplify things for the future and any change should be considered as part of that.”



Ros Altmann hits out at ‘pensions as Isas’ plans

Pensions minister Ros Altmann has clashed with the Treasury after it floated plans to tax pensions like Isas, saying such a move would be a “big mistake”. Last week the Government launched a wide-ranging consultation on reforming the pension tax relief system. One of the ideas proposed is moving from the current exempt-exempt-taxed model, where […]


Altmann backed over ‘pensions as Isas’ attack

Mark Sands and Sam Brodbeck Pensions minister Ros Altmann has won support for her stance that taxing pensions like Isas would be a “big mistake”. In an interview with Money Marketing last week, Altmann said the Treasury’s Budget proposal to tax pension contributions rather than pensions in payment should be avoided. She said: “Certainly the […]

Ros Altmann

Conservative minister Ros Altmann expelled from Labour party

Pensions minister Baroness Ros Altmann has been expelled from Labour after it was discovered she was a party member while holding her post in the Conservative Government, the Huffington Post UK reports. The website quotes a Labour source saying Altmann “has been a fully paid-up member since March 2014 – until we expelled her today”. […]

Can UK companies satisfy global appetites?

By Mark Martin, Manager of Neptune UK Mid Cap Fund

Rapid economic and income growth is leading to a dramatic shift in diet towards protein products right around the globe. UK companies such as Genus, the world’s largest livestock breeder, are benefiting from this increasing demand. Mark Martin, manager of the Neptune UK Mid Cap Fund, discusses this investment theme.


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. Are we sure it didn’t matter till April 2015? If someone joined or opted into a net pay model while below the threshold wouldn’t they be worse off? AE is not the only way to join a scheme after all.

  2. Stewart Tomlinson 17th September 2015 at 3:11 pm

    Why should Ms Altman come under fire for stating what is obvious to any group pension practitioner. Now were not compelled to offer only net pay, as trust-based schemes can use either basis. If People’s had the foresight to offer both bases why should Now be now complaining? There is, though, no excuse for Tesco using only the net pay basis; maybe they should be having a full and frank conversation with their advisers!!!

  3. The pace of communication in this internet age never ceases to amaze me. Tweet a comment one moment, and within months a response flashes out across the Ether. Hardly time to catch your breath…

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm