HMRC is sending letters to around one million low earners who could be entitled to a pension top-up – but there are fears many of the letters could end up in the bin.
The taxman is beginning a major letter-writing campaign this month to identify people who may have missed out on pension tax relief because of the way their workplace pension operates.
Eligible workers will be invited to claim a “low earner’s pension payment”, with a 2021 Government consultation estimating the average payment could be around £53.
Around three quarters of the people affected are thought to be women.
HMRC says payments are expected to start flowing “in the next few months” as claims are received, with the letters being rolled out gradually until early 2027.
But former pensions minister Steve Webb has issued a stark warning that many recipients may simply throw the letter away.
The LCP partner said people could be suspicious of an unexpected letter from HMRC offering them money – and some could even mistake it for a scam.
He said: “The process of getting these payments to the right people is going to be incredibly painful and there is a real risk of huge non take-up.”
“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,” he said.
Good morning, we're here until 8pm to answer your general queries. No personal details please. ❎
Recognising and reporting scams helps protect taxpayers across the UK. ✅
If you’re unsure if the contact you’ve received is a scam, report it below. ⬇️https://t.co/znakmBePUb pic.twitter.com/rtppBJdwLm— HMRC Customer Support (@HMRCcustomers) August 7, 2026
“Some may suspect it is a scam”
The issue affects low earners who were enrolled into workplace pension schemes using a Net Pay Arrangement.
Under this system, pension contributions are taken from pay before income tax is calculated.
That normally works well for taxpayers because it reduces their taxable income.
But workers who earn below the income tax threshold do not have an income tax bill to reduce.
This means they can miss out on the 20 per cent pension tax relief that they would have received if their workplace scheme used the alternative Relief At Source system.
For example, someone paying £80 into a Relief At Source pension receives a £20 top-up from HMRC, taking the contribution to £100.
The problem has become more significant because automatic enrolment can apply to people earning £10,000 or more, even if they are below the income tax threshold.
Changes mean eligible people can now claim a top-up for pension contributions made from the 2024/25 tax year onwards.
HMRC will initially contact people about payments for 2024/25. Those who register should then be able to benefit from a more automated process for later years.
Webb said it was crucial that people recognised the letters as genuine and understood that they could be entitled to money.
Recommended reading:
- Government launches new phone alert service for millions across UK
- M&S brings back iconic St Michael label in major fashion collaboration
- Pensioners given urgent warning over DWP State Pension payments this week
He said: “It is clearly unfair that around 1 million low earners have missed out on pension tax relief, simply because of the way in which their workplace pension is administered.”
“It is vital that communications are effective to make sure that people get the money to which they are entitled.”
The first payments are expected within the coming months, but the warning is clear: check any genuine HMRC letter before putting it in the bin.
Have you had an HMRC letter you thought was a scam? Tell us in the comments below...
Share