Finance

Pension warning: Furlough scheme hits pension contributions by 25% due to ‘tax kink’

Members of pension schemes who don’t pay Income Tax – usually those earning less than £12,500 per year – are permitted to basic rate tax relief (20 percent) on pension contributions up to £2,880 a year.

In practice, this means that HM Revenue and Customs (HMRC) will top up a net contribution of £2,880 to a gross £3,600.

However, this tax relief is only available where the pension scheme operates on a relief at source basis – known as RAS.

It’s not available for schemes that operate a net pay arrangement.

Adrian Boulding, Director of Policy, NOW: Pensions said: “It’s becoming extremely visible that women are being hit harder this pandemic when it comes to their finances and will continue to be disproportionately impacted as the economic crisis unravels.



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