Pension contributions within the LGPS benefit from tax relief because they are deducted from gross pay. However, employees earning below the income tax threshold (£12,570) have historically missed out on this benefit, as they do not pay income tax.
From the 2024/25 tax year, HMRC has introduced a direct ‘top up’ payment for lower earners. This ensures that eligible individuals receive a financial benefit equivalent to pension tax relief, even if they are not taxpayers.
From August 2026, HMRC will be contacting around 1 million eligible individuals directly about the lower earner’s pension payment. This payment makes sure low earners achieve similar outcomes regardless of the type of workplace pension scheme they are in.
Who may be eligible
An employee may be eligible if they did not obtain income tax relief on their pension contributions in any tax year from 2024/2025 onwards. This would be if they meet both these conditions:
- earned close to the personal allowance in a tax year, typically £12,570
- contributed to a workplace pension through a net pay arrangement pension scheme
The LGPS is a net pay arrangement pension scheme. HMRC will assess eligibility separately for each tax year, and individuals may qualify for one or more years, from 2024/2025 onwards.
What employees should do
Individuals do not need to contact HMRC to receive a payment. Eligible individuals should wait to be contacted by HMRC, either by post or through their personal tax account.
Fraud and scam awareness
As HMRC will be contacting individuals about money they are owed, you may question whether messages are genuine. Employees can be reassured that:
- HMRC correspondence can be checked on www.gov.uk by searching check if an email you’ve received from HMRC is genuine — low earner’s pension payment can be found from August 2026
- HMRC will never ask for money transfers, PIN codes, or passwords