This is an article from This is Money , published in March 2026 – you can read the original here
Gavin who asked the question of Aviva
You can read the story of the man who asked Steve Webb the question when he found out he’d been left short of tax relief. It gives us some background. Gavin is a journalist , a member of our group and someone who has done himself and his colleagues a lot of good.
I am not sure that there are many people who would or could do what Gavin did. He worked for Aviva between 2019 and 2025. They were his provider and his employer.
Here is how HMRC explained tax relief when auto-enrolment was being introduced. Steve explains how complicated tax relief becomes when salary sacrifice is used to swap personal contributions for employer contributions to a workplace pension.
How HMRC explains it for generic worker “John”
The question asked to Steve Webb by a This is Money reader.
I suspected many thousands of pounds were missing from my workplace pension – and I was right. But, for more than a year, my provider did nothing except conduct a failed audit.
My provider hadn’t claimed and added the tax relief which was due for years because the scheme was ‘misclassified’.
Apparently, my provider and my employer were both unaware that the scheme was wrongly classified as salary sacrifice instead of tax ‘relief-at-source’. This was the case since inception, and despite audits, including of payslips, it was never picked up.
The provider also didn’t notify me that multiple payments had been made late, consistently, including later than the regulatory 90 days on at least six occasions.
I was not compensated for the resulting loss of investment growth because, it said, these losses were neither ‘material’ nor ‘reportable’.
It took inordinate persistence on my part to instigate a five-plus months’ internal investigation. Only then did all of the above come out. Had I not pushed and pushed back, against denial, nobody would have been any the wiser.
I am no actuary, no pensions expert. Just a policyholder with a hunch who had to fight to prove he was right.
Steve Webb – the Answer:
Thank you for getting in touch. I entirely agree that it shouldn’t have been down to you to identify that there was a problem here.
It seems quite possible that the problem would still be continuing if you hadn’t taken action. Your persistence has benefited your colleagues, who were also missing out.
Your experiences are a reminder to anyone in a workplace pension to check that they are also being correctly awarded any tax relief that they are due.
The background to this issue relates to the way in which tax relief is applied to pension contributions.
How pension contributions, tax relief and salary sacrifice work
There are two main approaches, both widely used across workplace pensions.
– Relief at Source (RAS): You pay into a pension out of your take-home pay. HM Revenue & Customs then tops up your payment by crediting basic rate relief directly into your pension pot.
This means that if you, as an employee, pay £80 into a pension, your pension provider will claim an extra £20 from HMRC. If you are a higher rate taxpayer, you can claim extra relief by contacting HMRC or through your tax return.
– Net Pay Arrangement (NPA): In this case, your pension contribution is taken from your gross pay – before tax or National Insurance is worked out.
This means you get full tax relief immediately, because you are taxed only on what is left after your pension contributions has been deducted. There is no need for a top-up from HMRC.
And why net pay doesn’t always work… this time from me (with help!)
It’s true that the net pay system works best so long as you pay tax. But it doesn’t work at all if you pay contributions into a pension and not income tax. If your pay is in the gap between the income tax threshold and the point at which you are auto-enrolled into a workplace pension, then under net pay you get no income tax relief.
This might sound right but it’s not! HMRC has agreed that paying an incentive to you is not dependent on you paying tax and it will from this year being paying an amount to those who claim for it , where they are paying pension contributions but not tax. It is a problem that’s been around for over ten years. There’s going to be no retrospective payment and those impacted are getting nothing now though they were originally promised that the compensation would start in 2025.
The lesson
It looks like net pay, if the compensation for the lowest earners is paid properly, is the simplest and quickest system (as Steve Webb points out). We are pondering whether to offer employers net pay or relief at source or both (L&G offer two master trusts one for each).
We think the lesson is to keep it simple and do one or the other but to move towards net pay with the nastily complex rebate for low-earners, made as easy for them , as the HMRC can do.
As for Gavin’s salary sacrifice mess that is discussed, there is only one answer and that is for administrators of workplace pensions to have proper communication with employers. In this case the administrator and the employer seem to have been the same – Aviva.
This is one of the many tasks that can be addressed with better technology and it’s one we hope is now being taken more seriously. For workplace pensions to properly do their job (DC and CDC) , proprietors must employ a proper system and good administrators to use it; otherwise accidents like these will occur.
The key to everything is for employers, administrators and the scheme’s governance to work together rather better than happened here.
Thanks to Steve Webb for his article and
Kate Upcraft
Thanks too to Kate Upcraft who has been teaching me about the “net pay anomaly” since 2014.
Thanks to Gavin T for bringing this to our attention via This is Money.
