The Government has confirmed that payments to around one million low earners affected by the pension tax relief ‘net pay anomaly’ will begin over the coming months and continue into early 2027.

The payments, which apply from the 2024/25 tax year, are intended to address a long-standing disparity between workplace pension schemes using net pay arrangements and those using relief at source, with eligible individuals expected to receive an average of around £70 a year.

Around three quarters of those affected are women, according to AJ Bell, which called it a "scandal" that the issue has taken so long to address.

The anomaly meant low earners below the income tax personal allowance could miss out on tax relief when contributing through a net pay scheme, while those in relief-at-source schemes received a 20% top-up from HMRC. The Government first announced plans to address the issue in November 2021.

Rachel Vahey, head of public policy at AJ Bell, said: “It is a scandal that around one million of the UK’s lowest earners have missed out on valuable pension tax relief because of the so-called ‘net pay anomaly’.

“While the Government deserves credit for finally delivering a solution and putting it into legislation, the first payments to those affected have been a long time coming. Those affected won’t get to see their money until later this year or into next – a year after it was originally promised, and over a decade after the problem first came to light."

HMRC said it will identify eligible individuals and contact them directly by post or through their personal tax account. Payments will be made directly into recipients’ bank accounts and can be added to pension savings if they choose.

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