The government has said it is “not cost effective” to reform pensions tax relief, reiterating its position on the net pay anomaly.
On 26 April, Chancellor Philip Hammond responded to questions surrounding the matter from the Treasure Committee, saying that it would be a “challenge” to intervene in a cost-effective manner where it cannot be automatically done.
The anomaly is a result of the difference between the income tax threshold, which has recently increased to £12,500 per year, and the auto-enrolment threshold, which remained at £10,000. This difference means that those earning less than the personal allowance will not be credited with tax relief.
Hammond told the committee: “I have to tell you that I am not sighted on the detail. The Economic Secretary [John Glen] is right that the challenge for us in anything around auto-enrolment or small-scale savings is to make an intervention cost effective where it cannot be done automatically, and you have already explained why it cannot be.”