Are you one of the 1.5 million workers who face a 25% penalty on their pension savings?
According to one of the country’s major tax reform organizations, over 1.5 million low-income workers in the UK are paying a 25% penalty on their pension contributions.
Around three-quarters of individuals affected by the pricey tax glitch are women, according to estimates.
Workers are paying an extra £65 a year due to the way some employers’ pension schemes function.
Through a tax relief method known as relief at source, several pension schemes offer their employees a government-funded savings incentive.
This method allows low-wage workers to automatically receive a taxpayer-funded pension contribution.
Many other pension scheme providers, on the other hand, use a net-pay structure to deposit this money into pots.
While this is sufficient for the majority of workers, those who earn less than the £12,570 income tax level are disadvantaged.
Workers in this salary bracket miss out on the tax-payer-funded contribution to their pensions that they would otherwise be entitled to, and instead have to pay it out of pocket.
The government released its responses to a number of tax consultations earlier this week, but not its request for evidence on “pensions tax administration,” which deals with this subject.
Last July, the government launched a consultation on the management of pension tax relief, inviting input from possible stakeholders.
The Low Incomes Tax Reform Group (LITRG) has openly criticized the country’s low-income employees’ lack of progress in achieving justice.
The reform group, which is linked with the Chartered Institute of Taxation (CIOT), has been working for the past 20 years to improve tax, welfare, and tax credit laws.
The LITRG’s Senior Technical Manager, Kelly Sizer, expressed her dissatisfaction with the government’s lack of action on this anomaly and contextualized how it is likely to effect the public.
“For affected low-income workers, the cost of this pensions inequity can equate to the price of a weekly purchase per year,” Sizer said.
“This is an unacceptably high price to pay for the same pension savings as those whose employer has opted to adopt a relief at source arrangement.
“Because this problem has been recognized for several years, the total cost is rising and will continue to rise the longer the government waits to execute a solution.”
“It is so unfortunate that the government has not taken advantage of this opportunity.” Brinkwire Summary News