HMRC (Her Majesty’s Revenue and Customs) is preparing to send letters to low-income workers in the UK, offering them an extra pension top-up. This new payment comes after a recent change in how tax relief on pensions is given to those earning less than £12,570 a year.
However, experts warn that many people may ignore the letter, not realising it could bring them free extra money.
What Has Changed?
Previously, workers in a net pay arrangement (NPA) pension scheme who earned below the tax-free personal allowance didn’t receive any tax relief on their pension contributions. This meant they missed out on the 20% tax top-up that others in relief at source (RAS) schemes got—even when they earned the same amount.
Now, HMRC has corrected this imbalance.
Under the new rules, low-income workers in NPA schemes will now get a 20% top-up on their pension contributions—just like their peers in RAS schemes. However, instead of adding the money to the pension, HMRC will pay the money directly into the worker’s bank account.
Who Will Get the Letter?
The letters from HMRC will be sent to eligible workers who:
- Earn below £12,570 annually
- Are enrolled in a net pay arrangement (NPA) pension scheme
- Have contributed to their workplace pension
- Recipients will be asked to provide their bank details so that HMRC can transfer the money directly.
Why This Matters for Women and Part-Time Workers
According to pension consultancy Hymans Robertson, 75% of people eligible for the payment are women, who often take up part-time and lower-paid roles. This move is expected to benefit women the most and could help reduce the gender pay gap—especially during the ongoing cost-of-living crisis.
However, the firm has warned that some workers may mistake the HMRC letter for a scam and throw it away, potentially missing out on their rightful payment.
What Employers Need to Do
Employers are being urged to inform and support their low-paid staff about the upcoming HMRC letters. Since the money is coming directly from HMRC and not from employers’ funds, it’s a great opportunity for companies to help their workers without any cost to the business.
Hannah English, head of DC corporate consulting at Hymans Robertson, said:
“Employers should seize this opportunity to boost their employees’ income during hard times—especially with rising national insurance and slow economic growth.”
If you’re a low-income worker with a workplace pension under a net pay arrangement, keep an eye out for a letter from HMRC. It could mean free extra cash in your bank account—money you missed out on in the past but now can finally receive.
Employers are advised to spread the word and ensure eligible staff don’t miss out on this helpful benefit.
FAQ’s
Who will get the HMRC pension top-up?
Workers earning less than £12,570 annually and enrolled in net pay arrangement pension schemes will receive a top-up from HMRC.
How much is the HMRC top-up worth?
Eligible workers will receive 20% extra on their pension contributions, paid directly into their bank accounts by HMRC.
What should I do if I get a letter from HMRC?
Don’t ignore the letter. Follow the instructions and provide your bank details securely to receive your pension top-up.
Why is this important for women?
Around 75% of those eligible are women in part-time or low-paid roles. This payment could help close the gender pay gap slightly.
Is the top-up paid by my employer?
No, the payment is made by HMRC, not your employer. It’s a government move to correct past tax relief differences.
