State Pension  

OTS tells govt to sort out state pension credits

He added: “The suggestion people should be able to claim back national insurance credits if they’ve missed out is common sense, and the government should reform the system to ensure that people understand the implications of not claiming child benefit.”

The OTS also urged the government to find a solution for low earners who miss out on tax relief if the scheme they are enrolled in is a net pay arrangement, “without making it more complicated for those affected”.

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Members of pension schemes who don't pay income tax are granted basic rate tax relief of 20 per cent on pension contributions up to £2,880 a year.

In practice this means HMRC will top up a net contribution of £2,880 to a gross £3,600.

But this tax relief is only available where the pension scheme operates on a relief-at-source basis, which is only accessible through a handful of companies.

It is not available for schemes that operate a net pay arrangement, which the majority of pension funds in the market do.

The difference between these two arrangements has become more noticeable since the income tax personal allowance increased to £12,500, which is above the auto-enrolment minimum threshold of £10,000, meaning more people fall into this gap.

However, earlier this year former chancellor of the exchequer Philip Hammond said it is not cost effective for HM Treasury to act on this anomaly.

maria.espadinha@ft.com

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