HMRC update as more than a million people owed cash | Personal Finance | Finance

More than a million low-paid workers, the vast majority of them women, are being forced to wait an extra year for a long-promised £70 pension top-up due to government delays and bungled IT systems.

The payment – meant to correct a long-standing pensions injustice – was due to arrive next year but has now been pushed back to 2026.

The problem centres on a little-known but significant pensions quirk affecting those enrolled in so-called ‘net pay arrangement’ (NPA) schemes.

These are used by many workplace pension providers and often penalise workers who earn too little to pay tax – typically those on part-time or low-wage jobs, disproportionately affecting women.

By law, anyone earning over £10,000 a year is automatically enrolled in a workplace pension. But if their income is below the £12,570 tax threshold, and they’re in a net pay pension scheme, they don’t get the usual 20% top-up from the Government – unlike those in ‘relief at source’ schemes, who do.

In short: two workers can contribute the same amount to a pension, but one ends up with less – simply because of the scheme their employer uses.

In 2022, ministers promised to fix this glaring inequality after mounting pressure from the Net Pay Action Group, which includes consumer champions and campaigners. Laws were changed in April this year to allow the top-up payments to go ahead.

But now – according to Corporate Adviser – the Treasury says the scheme won’t launch properly until 2026 – meaning millions will be left out of pocket for at least another year.

The £70-a-year payments will be handed out automatically to those identified by HMRC, with no need to apply. However, recipients will need to confirm their bank details via a digital platform – once it’s built.

A spokesperson said: “Top-up payments for individuals will be made for the 2024 to 2025 tax year and subsequent years, but the payments for 2024 to 2025 are likely to be offered later than planned — in 2026.”

The Government has allocated £38 million just to set up the IT and administration systems. Despite this, official forecasts suggest fewer than half of eligible workers will actually receive the payment, due in part to how the system interacts with means-tested benefits.

Critics say the delay is just the latest example of how bureaucratic red tape and sluggish systems hit the most vulnerable the hardest.

Around a third of UK multi-employer pension providers operate solely on a net pay basis, as do most single-employer schemes, meaning millions more could be affected in future.

An HMRC spokesperson said: “The government remains committed to this policy, which will see approximately one million individuals in net pay schemes offered an annual payment of around £70.”