HM Revenue and Customs (HMRC) has begun contacting approximately one million low-paid workers who may have missed out on pension top-ups due to the way their workplace pension contributions were handled. The initiative aims to rectify a situation where certain workers did not receive the full basic-rate tax relief to which they are entitled.

Under the UK’s auto-enrolment pension system, employees earning at least £10,000 annually can be automatically enrolled in a workplace pension scheme, even if their income falls below the threshold for paying income tax. Typically, individuals contributing to personal pension pots receive government top-ups through basic-rate tax relief applied at source. However, many workplace pensions deduct contributions directly from wages before income tax is calculated, rather than adding relief after the fact.

This approach means that for low earners paying no income tax, reducing their taxable income does not translate into actual tax savings, resulting in missed pension top-ups. Recognizing this discrepancy, government ministers have approved a process allowing affected workers to reclaim the funds they are owed.

HMRC started dispatching letters to eligible workers in August 2026, with outreach expected to continue into early 2027. Initial correspondence focuses on the 2024/25 tax year, after which HMRC plans to implement an automated system to address entitlements in future years. Officials estimate that roughly 75% of those impacted are women. Payments are projected to begin rolling out within the next few months, with average refunds estimated at about £53 annually, though the amount varies based on individual pension contributions.

Steve Webb, a pension expert at consultancy LCP, described the situation as “clearly unfair,” noting that the affected workers lost out simply because of the structure of their workplace pension arrangements.

This effort represents a targeted correction to ensure that low-earning workers receive the full pension benefits intended by the tax relief system, addressing an oversight embedded in current pension contribution mechanisms.