A million low earners could get a PENSION WINDFALL this year (and in future years)

At last HMRC has given us a date for the payment of cash into low-earners bank accounts. You’ll get it if you were enrolled automatically into a certain type of pension.

That type of pension is known as net pay and gives tax relief if you are paying tax, but it does not incentivise those who pay no tax.

If you were in another type of scheme which uses “relief at source“, you’d get the incentive if you pay tax or not. You’ve had it and you won’t get a wad as you’re not due it.

Here are a few generalisations we can make

If you are in a defined benefit scheme (most commonly public sector and LGPS but also USS, RailPen and a few others) you’ll be paid a wad from HMRC.
If you are in a few DC schemes including NOW pensions and most company schemes you’ll get a wad if you’re not paid much.
If you are in Nest, Peoples and any GPPs you won’t get a wad, that’s because you’ve had your relief already (at source as the HMRC say).
The estimate is that your wad will be £70 for each year from 2024-5.

The HMRC have finally announced how things are going to work

Here’s what HMRC have told the payroll folk (thanks to my usual payroll professional) who wonders how there’s so much fuss and bother. There is a lot of frustration among those who’ve been campaigning for this since the start of auto-enrolment.

They spend so much time/money on campaigns about reacting to emails offering tax refunds and then introduce an ‘official’ one.

After 14 years of this being an issue I would have expected HMRC could use the data they have to identify the affected individuals before now.

The FPS has a field to show it’s an NPA scheme and they have the employees’ earnings ???.

The Full Payment Solution (FPS) document is what schemes need to complete to keep the HMRC up to date…

This is an entitlement under the tax system, these individuals have suffered a detriment as have all the overcharged pensioners and yet HMRC’s lack of effort means that most won’t claim what they’re entitled to.

I shall write about it for the AMNT but you’re right the Paul/Martin Lewis factor is the only thing that will move the dial on claims.

So read what follows with a little sceptacism!

I’ve put the bits in bold which I think are really important

Low earner’s pension payment — what employers need to know

From August 2026, HMRC will be contacting around 1 million eligible individuals directly about the low earner’s pension payment, previously referred to as the low earner’s anomaly. This payment makes sure low earners achieve similar outcomes regardless of the type of workplace pension scheme they are in.

What this means for employers

Employers do not need to take any action. There is no requirement for employers or payroll teams to apply, assess eligibility, amend payroll records, or contact HMRC on behalf of employees.

HMRC will identify eligible individuals and contact them directly.

Who may be eligible

An employee may be eligible if they did not obtain income tax relief on their pension contributions in any tax year from 2024 to 2025 onwards. This would be if they meet both these conditions:

earned close to the personal allowance in a tax year, typically £12,570

contributed to a workplace pension through a Net Pay Arrangement Pension Scheme

HMRC will assess eligibility separately for each tax year, and individuals may qualify for one or more years, from 2024 to 2025 onwards.

Employers do not need to assess eligibility or confirm pension arrangements for employees as part of this process.

What employees should do

Individuals do not need to contact HMRC to receive a payment.

If employees approach you with questions, you can reassure them that:

eligible individuals should wait to be contacted by HMRC, either by post or through their personal tax account

once they have received contact, eligible individuals should follow the instructions provided by HMRC to accept their payment

Fraud and scam awareness

As HMRC will be contacting individuals about money they are owed, employers may receive questions about whether messages are genuine. Employees can be reassured that:

HMRC correspondence can be checked on GOV.UK by searching check if an email you’ve received from HMRC is genuine — low earner’s pension payment can be found from August 2026
HMRC will never ask for money transfers, PIN codes, or passwords