Almost one million women to receive HMRC refund letter

A pension boost could soon arrive in the post

The letters explain how eligible workers can claim a pension top-up payment after missing out on tax relief because of the way their employer’s pension scheme was set up.

The Government announced the scheme earlier this year to reimburse people who were affected, with the average payment expected to be around £70, although the amount can be higher or lower depending on the individual.

HMRC has already started sending the letters and will continue distributing them in batches until early 2027, meaning some people may not hear anything for several months.

The scheme is particularly relevant to those who earned around £12,570 a year, which is the point at which income tax starts to apply. 

HMRC estimates that women make up roughly three quarters of everyone eligible, meaning around 990,000 women could potentially receive the payment.

The pension tax relief issue explained

The payment is intended to correct an issue that affected some lower-paid workers in workplace pension schemes, leaving them with less tax relief on their pension contributions than they should have received.

Pension contributions usually benefit from tax relief, which means you do not have to pay income tax on some of the money you put towards your retirement. However, the way that relief is applied depends on the type of pension scheme your employer uses.

With a Net Pay Arrangement, your pension contribution comes out of your salary before income tax is calculated, so the tax relief is applied automatically. 

A Relief at Source scheme works differently, as the contribution is taken after income tax and National Insurance have already been deducted.

Because of this difference, some people earning below the income tax threshold ended up missing out on tax relief. The low earner’s pension payment is designed to make up for that lost benefit by giving eligible workers a top-up.

This is how to tell if your HMRC payment is genuine

Former pensions minister Steve Webb has warned that there is a “real risk of huge non-take-ups”, particularly because many people will have never heard about the issue before and may be understandably suspicious of being contacted out of the blue.

“Most people will not have a clue about this issue and may be suspicious of a letter out of the blue from HMRC offering them free money. Some may suspect it is a scam.”

However, there is an important detail that can help you spot a genuine payment as you do not need to apply for the low earner’s pension payment or contact HMRC to claim it.

If you are eligible, HMRC will contact you directly, either by post or through your online tax account, so it is worth making sure your personal details are up to date.

You should also be immediately cautious if anyone claiming to be from HMRC asks you to transfer money, hand over your password or provide a PIN. 

HMRC has confirmed that it will never ask for any of these things in order for you to receive the payment.

If you are unsure about a letter you receive, HMRC has information on GOV.UK explaining how to check whether correspondence is genuine.