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Large numbers of part-time workers are being denied valuable tax breaks on their pension contributions as UK government officials knowingly allow them to save into schemes that will not pay them the relief they are entitled to.

As George Osborne, the chancellor, considers options for another shake-up of the pensions system, new figures from Chase de Vere, the workplace pension advisers, suggest that up to 1.5m workers are missing out on more than £85m in tax relief because of a payroll anomaly.

The government is being urged to rectify the problem, which means large numbers of low earners, many of whom work part-time, are unable to claim the tax relief they should be receiving.

The concerns surround the use of “net pay” arrangements, which are commonly used by workplace pension schemes.

These arrangements allow tax relief on pension contributions to be credited efficiently to higher earners, but have no mechanism to do the same for those earning below the income tax threshold of £10,600 — thus ensnaring many part-time workers.

In “relief at source” schemes, someone earning under £10,600 gets a top-up from the government that is paid into their pension pot. But in a “net pay” arrangement, that does not happen.

“The huge numbers being automatically enrolled on lower salaries is exacerbating the issue,” said Hugh Nolan, chief actuary at JLT Employee Benefits.

The National Association of Pension Funds, which represents workplace pension schemes, said most employers chose to operate their schemes on a “net pay” basis because it ensured that, taken overall, the maximum amount of contribution was paid into members’ pensions “as quickly as possible”.

The NAPF pointed out: “The current anomaly between ‘net pay’ and ‘relief at source’ is a very real — although very recent — problem for both savers and schemes. We have asked the government to conduct a thorough review of how this issue can best be resolved and avoided in the future.”

Now: Pensions, a provider that runs a net-pay arrangement, said: “As it currently stands, there is nothing [non-taxpaying] members can do to reclaim this money and we are doing all we can to get HM Treasury to address this inequality.”

The Pensions Regulator, which oversees workplace pensions, said pension companies should offer employers “clear information about the tax implications for their workforce of any given scheme”.

“We suspect this will come as a huge shock — not only to part-time employees but many employers, too,” said Sean McSweeney, a pension specialist with Chase de Vere. “The lesson is clear: for employees, do not assume you will automatically get tax relief if you pay into a pension.”

The Department for Work and Pensions said official figures were not held on the number of non-taxpayers in net-pay arrangements. But it said it did not recognise the estimates of lost tax relief suggested.

“The Pensions Regulator will be publishing clear guidance for small and micro-employers shortly,” it said.

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