UK - A controversial decision by the Inland Revenue to tax backdated pension contributions will deter thousands of part-time workers from seeking re-entry into schemes, lawyers claim.
The move follows a ruling from the House of Lords, which gives some 60,000 part-time workers the opportunity to join their employers’ pension funds retrospectively.
These workers have now been told that any payment they make into their schemes will not benefit from tax relief.
Fears have been raised by lawyers and trade unionists that the Revenue’s actions will deter many part-timers from following their claims or considering rejoining a company scheme.
Linklaters solicitor Sara Henchoz said the Revenue made the decision to tax backdated contributions on the premise this cash was not locked away and free to invest.
She stressed the development could have a serious impact on the continuance of claims for re-entry into pension schemes.
“The fact they have to make backdated contributions was the first blow, the no tax relief ruling is the second.”
Unison pensions officer Glyn Jenkins agreed and believed many claimants would back down in the face of this “worrying” development.
He said: “The whole basis of the claims was to put these people back in the position they would have been if they had been admitted to a scheme in the first place.
“It is very sad that the Revenue won’t make an exception to allow them to do that.”
An Inland Revenue spokeswoman said that following the initial House of Lords ruling on part-timers, further clarification was needed on tax rules.
“The decision was to make no special exemption. There is no tax relief available for employee contributions after they have left the relevant employer.”
But she added that employees could ask their previous firms to make the payments on their behalf as an “employer contribution”, which would then receive tax relief.
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