Around one million low-paid workers are set to receive an unexpected letter from HMRC telling them they may be owed a pension top-up worth £53 on average. The payments are intended to correct an unfairness in the pension tax relief system that has left some low earners paying more towards their workplace pension than other people on a similar income.
HMRC will begin contacting those affected this month, with letters continuing into 2027. Around three-quarters of the people expected to benefit are women.
However, because the letters will arrive unexpectedly and may ask you to confirm payment details, there are concerns that some recipients will dismiss them as a scam. Here’s what you need to know.
Why are you being offered a payment?
You normally receive tax relief when you pay into a pension. In simple terms, the government contributes towards your pension by reducing the amount of tax you pay or adding money to your pension pot.
The way you receive this relief depends on how your employer operates its workplace pension. Under a “relief at source” scheme, your pension provider claims basic-rate tax relief from HMRC and adds it to your pension. You can receive this top-up even if your earnings are too low for you to pay Income Tax.
However, some employers use a “net pay arrangement”. Your pension contribution is taken from your pay before Income Tax is calculated, reducing the amount of tax you pay. This works if you earn enough to pay Income Tax. But if your taxable income is below the £12,570 personal allowance, there may be no tax bill to reduce, so you do not receive the same benefit.
The problem particularly affects people earning between £10,000 and £12,570 a year. You can usually be automatically enrolled into a workplace pension once you earn £10,000, but you generally do not start paying Income Tax until your income exceeds £12,570.
The new payments aim to correct that difference and give eligible low earners a similar outcome, whichever type of pension arrangement their employer uses. The change applies to pension contributions made from the 2024/25 tax year onwards. Government estimates suggest around 1.2 million people could benefit.
Are you eligible for a pension top-up?
You may qualify if:
- you paid into a workplace pension using a net pay arrangement
- your total taxable income was below the personal allowance
- you did not receive the full benefit of pension tax relief through your pay.
HMRC will use information it already holds to identify eligible people. You do not need to apply or contact HMRC before it writes to you. The amount you receive will depend on your pension contributions and circumstances, so you could receive more or less than the reported £53 average.
What should you do if HMRC contacts you?
Do not ignore the letter, even if the amount involved seems relatively small. The top-up is money you should have received because of your pension contributions. HMRC says it will explain how to receive the payment by post or through your online tax account. Although you will not need to prove that you qualify, you may need to confirm or provide payment details before HMRC can transfer the money to your bank account.
Make sure HMRC holds your current address. If you have moved without updating your details, the letter could go to your previous home and you may never know that a payment is waiting. You should also check your personal tax account directly through GOV.UK rather than following a link in an unexpected email or text.
How can you check that the letter is genuine?
Unexpected messages offering money are a common feature of scams, so it is sensible to be cautious. However, automatically dismissing the letter could mean losing money you are entitled to receive.
You can use HMRC’s official letter-checking guidance or contact HMRC using details you have found independently on GOV.UK.
Never rely solely on a phone number, web address or QR code included in unexpected correspondence. HMRC says it will never ask you to reveal passwords or PINs, or tell you to transfer money to receive your payment.
Be especially suspicious if somebody:
- pressures you to respond immediately
- asks you to pay a fee to release the money
- requests your full online banking password or PIN
- sends you a link to an unfamiliar website
- contacts you claiming they can secure a larger refund for an upfront payment.
If you receive a suspicious email, text message or phone call, you can report it to HMRC.
What if you think you qualify but do not receive a letter?
Letters will be sent in stages and the campaign is expected to continue into 2027, so you may not hear from HMRC straight away. In the meantime, check your payslips, pension documents or ask your employer whether your workplace pension operates on a net pay basis. You should also make sure your details are up to date with HMRC.
If HMRC tells you that you are not eligible and you believe its decision is based on incorrect earnings or pension information, ask it to explain the decision and correct its records. Keep copies of your payslips, P60, pension statements and any correspondence. If the problem relates to information supplied by your employer or pension provider, complain to them directly.
This article is for general information only and does not constitute tax, financial or pensions advice. Your eligibility and the amount you may receive will depend on your individual circumstances. If you are unsure, seek independent professional advice or contact HMRC directly.
If you have any thoughts on this topic, or any other consumer issues you would like us to cover, feel free to get in touch with us at support@resolver.co.uk