Pensions levelling up measure for low earners needs to be fairer, faster, and more effective, says LITRG

The Low Incomes Tax Reform Group (LITRG) has written to the Financial Secretary to the Treasury (FST) suggesting improvements to the Government’s proposals to make ‘top-up payments’ to low-income pension savers who currently miss out on government retirement savings incentives.  

The letter follows LITRG’s response¹ to consultation on the draft legislation to implement the top-up payments, which raised concerns about the detail and the 2025 implementation date.

LITRG’s letter to the FST (reproduced below) is supported by named members of the Net Pay Action Group – policy experts, pensions industry representatives, payroll specialists and others – who have been working together on this issue for around five years.

Kelly Sizer, Senior Manager for LITRG, said: 

“We broadly welcomed² the Government’s publication of draft legislation for inclusion in Finance Bill 2022/23 with the intention of resolving the longstanding anomaly of an estimated 1.5 million low-income workers (three-quarters of whom are women) missing out on government incentives towards their pension savings.

“As we want these proposals to work as effectively as possible, we are making a number of suggestions to the Government for improvements to the legislation and its implementation. We very much hope to see our suggestions incorporated into the draft when the full Bill is published in the spring.

“Under current plans, this legislation is not due to take effect until the 2024/25 tax year, with the first payments not being made until 2025/26. We urge the Government to reconsider this schedule in light of the cost-of-living crisis. There is significant concern that low-income workers looking to cut costs in the short term will consider opting out of pension savings to their longer-term detriment. Accelerating the implementation of the proposed top-up payments could help to prevent this.”