HM Revenue and Customs (HMRC) has confirmed that the £70 letters being delivered to some households are legitimate and not scams. The tax authority, operating under the Labour government, will be contacting eligible individuals over the next few months to issue refunds related to pension tax relief.
Typically, the letters inform recipients of refunds around £70, though the exact amount may vary. HMRC emphasises that anyone entitled to such payments will be contacted automatically, and no action is required unless the individual receives the correspondence.
The refunds relate to a disparity in tax relief for low earners who have contributed to pension schemes. When contributions are made to a pension, the government provides tax relief by allowing some of the money otherwise paid in tax to be directed into the pension instead.
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However, some low earners whose employers use a Net Pay Arrangement pension scheme have historically received lower pension tax relief compared to those whose pensions are administered through the Relief at Source method. Since employees cannot control which scheme an employer selects, the government has introduced a “low earner’s pension payment” to compensate individuals who have missed out.
A HMRC spokesperson said: “We understand that unexpected contact can cause caution, which is why we provide clear guidance on what to expect and how to verify the authenticity of the letters. Customers can confirm that a letter is genuine by checking on the official Gov.uk website and should only respond through official HMRC channels.”
Sir Steve Webb, partner at pensions consultancy LCP and former pensions minister during the coalition government, is raising awareness about these refunds. Known for helping to introduce the triple lock pension policy, Sir Steve expressed concern about the limited number of people the government expects to receive the payments.
“The process of ensuring these payments reach the right individuals is likely to be challenging, with a real risk of many eligible people not claiming,” he explained. “Effective communication is essential so that everyone entitled receives the money they deserve.”