When you pay into a pension, the government allows some of the money that would otherwise have been paid in tax to go towards your pension instead. This is known as tax relief, external.
For relatively complicated reasons, some low earners whose employer used what’s known as a Net Pay Arrangement pension scheme received less than those whose pension was administered through a Relief at Source scheme.
Employees have no control over the type of scheme that’s used, so the government has decided to top up those who have missed out, through what’s called a low earner’s pension payment.
Typically, they would have earned close to, but not more than, £12,570 a year (the starting point for paying income tax).
Top-up payments will initially be paid for the 2024-25 tax year, with automated payments subsequently kicking in for later years.
