employer pension scheme

employer pension scheme

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Do I just take the er contribution amount, pop it into the payroll as a non tax/non paye pay element?  The contribution goes straight from company bank account to the pension scheme provider.  Any other admin things to keep it all ok?

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By zebaa
11th Oct 2013 17:32

Um...

I'm a bit unclear on the question. but here goes.

Don't forget the ee contribution to be added to the er contribution. Both should be paid over by the 19th of the following month otherwise things can get heavy. You should be able to give the employee a statement of contributions made in the tax year, after year end, a bit like a P60. This should reconcile with the statement they get from the pension fund, so it is best to remit quickly, rather than hang on to the money & which no longer belongs to the company or employee anyway.

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By tom123
12th Oct 2013 09:24

We don't show the ER contribution on our payslips.

We don't show the ER contribution on our payslips, but we do show the EE contribution.

As it happens, we run a salary sacrifice scheme - so the EE contribution is a 'negative earning', effectively reducing the taxable pay - rather than a deduction in the same column as PAYE & NIC.

Different payroll software's have different possibilities.

Ours is calculated as a percentage of basic pay each month, so there is an uplift to calculate whenever a payrise occurs. Our software is not clever enough to work with percentages, so that is a manual calculation outside of payroll then a re-entry.

We upload the payment file directly onto Scottish Widows, other schemes have similar approaches, and the premium is collected by DD on a date we specify. We tend to pay the pension over in the same month as the deduction, as this makes for easier monitoring - at the expense of some cash flow effect.

We don't tend to give any additional statement to our staff, however.

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By Euan MacLennan
12th Oct 2013 11:37

The short answer is No

The employer's contribution to an occupational pension scheme (like the employer's NI contribution) does not need to appear on the employee's payslip, as it does not affect the calculation of the PAYE deductions from the employee's gross pay.

However, payroll software often includes the facility to disclose the er's contribution to a pension scheme (and also, er's NI) as a "for information" memo filed on the payslip.  Such software will usually also produce a report of the combined er's and ee's pension contributions to be paid over to the pension company each month, just as all payroll software programs will produce a report showing the total PAYE, including er's NIC, to be paid over to HMRC.

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By imbs
17th Oct 2013 23:22

thanks everyone

So is this totally wrong:  client has set up an employer pension scheme and only employer contributions are made (i.e. they come directly from the er bank account direct to the pension scheme provider). No employee contributions are made/processed.  So far, I haven't reflected the er contributions in his payroll. So is this approach ok or really bad?  Does the ee have to make a contribution if the er does?

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By Democratus
18th Oct 2013 10:03

@imbs

If the scheme is non contributory, i.e. the employees do not have to contribute anything then there is no need to do anything on the payroll, or reflect anything in the payroll. The contributions are paid by the Employer, it's simply Cr Bank and Dr P&L in the TB.

If the scheme is joint contributory then the employee will have to make contributions and should be reflected correctly in the payroll to allow for the correct tax and possibly NIC treatment. (depends ob scheme).

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By zebaa
18th Oct 2013 17:26

No, it is not wrong

To answer your question: no, it is not wrong to make a pension contribution in the way you have said.

To expand on that a little further: the company will get the pension contribution as a business expense in the P & L  and so reduce the corp tax. There is no effect on the employee, other than their pension pot grows.

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