Henry Tapper, pensions expert and founder of Pension Playpen, said that the HMRC has “been neglecting their duty”, especially because they haven't helped organisations such as Now:Pensions, which has been trying to find a solution.
He said: “This is called a government incentive, and if the industry can't make the government incentive work, then it is a problem for both.”
According to Mr Tapper, “there is an awful lot of schemes operating at net pay”, mainly because these are normally aimed at high earners.
Mr Webb argued part of the problem is that relief-at-source will only help the low earners, leaving high paid workers to claim back tax relief.
He said: “With relief-at-source, everybody is given standard rate relief. The money goes out of their take home pay and then HMRC adds standard rate relief, regardless of what their tax rate is.
“So, if you are a high earner, you would rather have it done by the net pay arrangement, because in this case your pension comes out of your pre-tax pay, so you immediately get 40 or 45 per cent relief, because they only tax you on what's left of your pay package.”
Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, said. most employers will not understand the difference between net-pay and relief-at-source, "and will not therefore be able to make that decision to switch to relief at source to ensure lower earners are not losing out”.