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Ltd Company pensions accounting entries

company pensions under auto enrolment

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Ist yr ltd company pension scheme run through the company payroll. Contributions under £3 k at co. y/e.

Do I need to ask the client to obtain a fair current market value of the fund at the company year end?

If the answer is 'yes' then are tthe following the accounting entries?

Cr 'bank' /debit 'pensions' in the p & l account. (following Taxfiler headings.)  If so, what do I do with the excess or deficit? Is the debit to p & l or to current assets and if so what do I name it?  Thank you.  

 

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By paul.benny
03rd Dec 2019 14:19

I think you've misunderstood pensions accounting.

In the company offering a defined contribution (or money purchase) pension, the contributions are a P&L expense. And that's it.

The reason that's it is that once the contributions are paid over to the pension provider, the company has no further obligation. The employees take all of the risk as to how much pension they will receive.

You seem to be thinking of final salary (or defined benefit) where the pension is guaranteed (ish) and the employer may have a liability if the contributions made are not enough to pay the pensions promised. In those circumstances you need to go through the whole process of valuing the scheme assets and liabilities and identifying any shortfall or surplus.

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By davidbarry
04th Dec 2019 13:43

thank you very much. Your reply is logical and does make sense.

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RLI
By lionofludesch
03rd Dec 2019 19:45

Personally, I post the employees' share to wages because thety paid it by deduction.

The employer's share goes to pensions.

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By davidbarry
04th Dec 2019 13:42

thank you very much for this reply. Journals now done.

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By davidbarry
04th Dec 2019 13:43

thank you very much. Journals now completed.

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