HMT confirms delay to pension net pay top-ups

HM Treasury has announced that planned payments to fix the “net pay anomaly” will be delayed by a year.

Low earners have to date missed out on 20% government top-ups to their pension contributions if they happen to be enrolled in pension schemes using a net pay arrangement. By contrast, low earners in schemes using relief at source receive the top-up. This so-called net pay anomaly predominantly affects women.

The Government announced in the 2021 autumn Budget that it would fix this issue and achieve equal outcomes by paying top-up amounts directly to affected individuals (i.e. low earners in schemes using net pay arrangements) for the tax year 2024/25 onwards. It intended to pay the first top-up amounts in 2025/26.

The Treasury now says that the timetable is being delayed due to practical obstacles such as complex IT changes being needed. The first top-up payments will still relate to pension contributions made in the tax year 2024/25 but are now likely to be paid a year later than planned, in 2026/27.