Low Earners Pension Payment Refund

From August 2026 HM Revenue & Customs (HMRC) will be writing to just over 1 million individuals of working age. These individuals (predominately women), will receive details of a pension payment refund due to them of around £70 on average.

This is not a scam!

What is the Low Earners Pension Payment refund for?

The refund is linked to the way tax relief on pension contributions is calculated.

Where an employer uses a Net Pay Arrangement pension scheme, contributions are deducted from gross wages before income tax.  The employee should therefore receive tax relief at source.

The issue arises whereby an employee is earning around the personal allowance of £12,570. They will potentially have no, or minimal tax liability. Because of this, they are not receiving the full benefit of the 20% tax relief on their pension contributions.

In contrast, if the employer uses a tax relief at source pension scheme, the government will automatically top-up employee pension contributions by 20%. Over a million workers are missing out on this!

The refund will be equal to the amount of tax relief an individual would have received if they were making pension contributions through a relief at source scheme.

Who may be eligible for the Low Earners Pension Payment refund?

Employees earning close to the annual personal allowance of £12,570 in the 2024/25 tax year and contributed to a workplace pension through a net pay arrangement scheme.

What should employees do

Eligible individuals should wait to be contacted by HMRC, either by post or through their personal tax account. HMRC will NOT call, text or email.

Once notified, instructions will be provided by HMRC on how to accept their payment and confirm their bank details.

If you’re concerned about fraud, HMRC correspondence can be checked on GOV.UK. This can be done by searching: check if an email you’ve received from HMRC is genuine.

HMRC will never ask for money transfers, PIN codes, or passwords.

If you have any questions regarding any correspondence received from HM Revenue & Customs, please contact Perrys and we would be happy to offer advice.

There is also a helpful article on the BBC website that can be found here.