In the UK, millions of pounds in tax relief has been overpaid to workplace pension savers, following several miscalculations made by thousands of employers across the country.

According to regulators, workers had wrongly benefited from double the pensions tax relief they should’ve thanks to errors made by employers. The discovery came following an analysis that suggested that have the pension data submitted by employers from their payroll software were filled with errors, which included, among others, contributions being too low.

Most workers in the UK paying into a company pension get tax relief on their contributions at the same rates at which they pay their income tax, which is either 20%, 40% or 45%. The UK government offers this as a way to get people to save for later life, but according to HM Revenue & Customs estimates, tax relief on pensions have cost the government about £41bn in 2016-17.

How workers benefit from this incentive program, however, is ultimately dependent on the system and payroll software used by their employer, which either results in them paying less tax in their monthly salary, or later, as a cash top-up added to their pension contribution.

The Pensions Regulator said that employers that were ‘inadvertently’ using the wrong tax relief mechanisms were causing erroneous numbers, both overpayment and underpayment, with regards to tax relief.

According to the Head of Industry Liaison with the regulator, Neil Esslemont, there are employers and advisors in payroll that don’t fully understand how the two tax relief mechanisms work. He says that only a small percentage of the approximately one million employers offering workplace pension schemes are making erroneous calculations, and they tended to be smaller employers who didn’t have access to a payroll team or pension advisers. He added that these errors that were happening also lead to several workers not receiving the tax relief that they’re entitled to.

Baroness Altmann, Pensionsync Chair and Former Pensions Minister, said that there is a giant flaw in the current system, in that the Pensions Regulator is not looking at data submitted to them to verify their accuracy; instead only relying on employers to say that the numbers are correct.

She says that it’s not clear how big the problem really is, so it’s important that the current system is improved right now to deal with the issues as soon as possible.