HMRC Low Earners Pension Refund: Nearly One Million Women Could Receive £70 Payment

HMRC is contacting low-paid workers over a new pension tax-relief payment worth around £70 on average, with women expected to make up roughly three-quarters of those affected.

Millions of workers are being urged not to dismiss an unexpected letter from HM Revenue and Customs as a scam, after the tax authority began rolling out its new Low Earner’s Pension Payment.

The payment, often described as the HMRC low earners pension refund, is designed to compensate workers who missed out on pension tax relief because their workplace pension operated under a particular type of arrangement.

Government modelling estimated that around 1.32 million people could be eligible for the correction, with women making up approximately 75% of those affected — equivalent to around 990,000 women.

The amount will not be exactly £70 for everyone. HMRC and pension specialists have said the typical payment is expected to be around £70 a year, although the actual figure depends on an individual’s earnings, pension contributions and tax position.

The latest official HMRC update, published on 27 August 2026, confirms that payments relating to pension contributions made during the 2024/25 tax year will begin over the coming months.

The rollout will continue in stages through the remainder of 2026 and into early 2027.

Importantly, this is not the usual pension-withdrawal tax refund that people may claim after being overtaxed when taking money from a pension.

It is a separate payment created specifically to correct what has long been known within the pensions industry as the “net pay anomaly”.

Why Is HMRC Refunding Low Earners?

The problem arises because workplhmrc low earners pension refundace pensions can provide tax relief in two main ways: Net Pay Arrangements and Relief at Source.

Under a Net Pay Arrangement, the employee’s pension contribution is deducted from earnings before PAYE income tax is calculated. For someone who pays income tax, this normally means they automatically receive the appropriate relief.

But the system historically created a problem for workers whose incomes were too low to pay income tax.

Under Relief at Source, an employee might contribute £80 from their pay and their pension provider claims another £20 from HMRC, giving them £100 in their pension.

That government top-up can still be received even where the employee does not actually earn enough to pay income tax.

Under the old Net Pay Arrangement rules, however, somebody already earning below the tax-free Personal Allowance could receive no equivalent saving because there was no income tax liability to reduce.

HMRC itself gives a clear example of how Relief at Source operates: an £80 employee contribution can be supplemented by a £20 basic-rate tax relief payment from HMRC.

AJ Bell illustrated the disparity with a worker earning £10,000 a year. If £80 is contributed through Relief at Source, £20 is added so £100 reaches the pension.

Under the historic Net Pay Arrangement treatment, the same low earner could effectively bear the full £80 cost without receiving the equivalent £20 benefit.

That difference is what the new payment is intended to correct.

HMRC says somebody may be eligible where they earned close to the Personal Allowance, typically £12,570, and contributed to a workplace pension using a Net Pay Arrangement. Eligibility is assessed separately for each tax year beginning with 2024/25.

This means the £12,570 figure should not simply be treated as a rigid “everyone below this amount gets £70” rule. HMRC will calculate entitlement using the information it holds about each individual.

The problem has particularly affected women. Government analysis originally estimated that 75% of people earning below the Personal Allowance while contributing through affected Net Pay schemes were women.

There is also a significant London dimension. Earlier Treasury analysis found that around 12% of those expected to benefit were based in London, although the exact geographic distribution of the current 2024/25 payment population may differ.

Rachel Vahey, head of public policy at investment platform AJ Bell, criticised how long lower-paid workers have had to wait for the anomaly to be addressed.

“It is a scandal that around one million of the UK’s lowest earners have missed out on valuable pension tax relief.”

Vahey noted that those on the lowest incomes had been disproportionately affected and that three-quarters were women.

She also stressed an important detail for recipients: the payment is going into their bank account, rather than automatically being added to their pension pot.

Although the issue has been discussed for years, the government legislated for payments to cover pension contributions from 6 April 2024 onwards. The first round has taken longer to arrive than originally envisaged.

HMRC’s August 2026 pensions newsletter confirms that the new rules are supported by the Registered Pension Schemes (Net Pay Arrangements) Regulations 2026, which were laid before Parliament in June.

The regulations ensure the payments do not reduce benefit entitlement or create National Insurance reporting requirements.

For people receiving Universal Credit or other means-tested support, that distinction is important: the legislation has specifically been structured so the payment does not affect entitlement to benefits.

How to Get the £70 HMRC Pension Payment and Spot a Scam?

Eligible workers do not need to submit an initial application to find out whether they qualify.

HMRC says it will identify eligible people itself using information already supplied through employers, payroll systems and pension schemes.

Recipients should wait until HMRC contacts them by post or through their Personal Tax Account, and then follow the instructions to accept the payment. Employers and payroll departments do not need to submit applications on workers’ behalf.

This distinction matters because the sudden arrival of a letter offering money has triggered concerns that genuine correspondence could be mistaken for fraud.

Sir Steve Webb, a former pensions minister who is now a partner at pensions consultancy LCP, has warned that confusion could lead to significant numbers failing to collect money to which they are entitled.

Webb said:

“Most people will not have a clue about this issue and may be suspicious of a letter out of the blue.”

He has warned of a serious risk of low take-up if people assume the correspondence is fraudulent.

The concern is understandable. HMRC-themed phishing messages are common, and scammers frequently use tax rebates and refunds as a way to persuade people to provide bank details.

But there are clear safeguards.

HMRC says it will never ask people to transfer money, reveal their PIN or provide passwords in order to obtain the Low Earner’s Pension Payment.

Anyone who receives unexpected correspondence should independently access their Personal Tax Account rather than following a suspicious link or providing information to an unsolicited caller.

According to Which?, eligible recipients will need to actively accept the payment and supply their bank details through their Personal Tax Account. People who cannot use the digital service will have an alternative route to deal with HMRC.

HMRC has also encouraged people to keep their postal address up to date so genuine correspondence reaches them.

An HMRC spokesperson said the department recognises that people may be cautious about unexpected offers of money and urged customers to verify correspondence through GOV.UK and respond only through official channels.

There is no requirement for workers to pay a claims management company to obtain the money. HMRC is determining eligibility directly.

The first payments relate to 2024/25, but the reform is not intended to be a one-off exercise. HMRC’s official guidance states that the Low Earner’s Pension Payment applies from the 2024/25 tax year onwards, with eligibility assessed separately for each subsequent year.

Someone could therefore qualify for the 2024/25 payment, fail to qualify the following year because their earnings increased, or potentially qualify in multiple years if they remain within the affected income and pension circumstances.

For low-paid London workers in particular, the message is simple: an unexpected HMRC letter headed around the Low Earner’s Pension Payment should not automatically be thrown away.

The typical amount may be relatively modest at around £70, but it represents the correction of a pension tax-relief discrepancy that has disadvantaged low earners for years.

And with close to one million women estimated to fall within the wider affected population, the scale of the correction is substantial.

Those who believe they may qualify should not contact HMRC simply to apply before receiving notification. HMRC’s current instruction is to wait for its letter or Personal Tax Account message and then follow the official process.