Master trust Smart Pension has announced that from next year it will offer a tax relief-at-source option in addition to its current net pay arrangement for auto-enrolment pensions. This will increase the value of contributions made by the lowest-earning members.
The new option will provide tax relief to Smart Pension members with earnings below the £11,500 income tax threshold. According to Smart Pension this could provide a boost to their contributions of as much as 25 per cent.
Non-taxpayers are entitled to basic rate tax relief, in the form of a top-up from HMRC, on contributions of up to £2,800 per year paid into UK pension schemes but in practice this has only been available to the lowest earners if their schemes operate on a “relief at source” basis.
Smart Pension CEO Andrew Evans said: "While contributions are low at the moment, as they rise in 2018 and again in 2019, the help that relief-at-source will give to those on lower incomes will be increasingly important as time goes by.
"Offering a relief-at-source option evens out a complicated system that inadvertently penalises the lower paid and we're delighted we'll soon be able to do this for our members."
Smart Pension said the new arrangement was currently being built into its system and that it expected it to be up-and-running in early 2018. Rival auto-enrolment providers Nest and The People’s Pension already offer a relief-at-source option.
According to The Pensions Regulator, auto enrolment has brought ten million people into saving for their retirement for the first time. Smart Pension currently runs workplace pensions for 60,000 firms and 300,000 members.
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