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Pension calculations

Pension contributions

Dear All,

I am acting on behalf of one of my clients and have just set up NEST pension for him. When I tried to put his employee contributions on NEST website and submit them from there rather from my payroll software I got an error message. The reason was because I calculated his contributions based on employee's qualifying earnings rather than full pensionable pay ( £850 monthly pay - £490=£360 on which I applied 1% employer cont=£3.60 and 0.8% employee cont=£2.88)

On the NEST website those contributions where calculated on the full amount of £850 and when I phoned NEST helpline asking how to amend their calculations I was told that was impossible as if done that would mean that the employer would not meet his legal requirements. When I asked NEST advisor for more explanations as according to me that was wrong they told me to seek further financial advice?

I am pretty sure that every employer can decide whether to use full pensionable pay or qualifying earnings and apply the minimum percentage on chosen amount and in both cases they will meet their legal requirements. Am I wrong in my calculations?

Any help would be highly appreciated

Replies

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20th Nov 2017 17:53

First thing to do is check whether you've set up the NEST scheme correctly and ticked the correct box.

Otherwise, I agree with you. I have just the one client who has not opted to charge pensions on the excess over £490 (or whatever limit applied at the time).

Send NEST an email query. You have a better chance of getting a reply from someone who knows what they're talking about as the YTS guys will just back off if they don't understand and pass it on to someone else.

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By jcace
21st Nov 2017 00:22

The NEST website will calculate the contribution based on what you input i.e. if you input £850 as the pensionable pay amount, NEST will calculate the 1% on the £850; if you enter £360, NEST will make the calculation that you want. So as well as making sure that the NEST Scheme is setup to calculate contributions based on Qualifying Earnings, you also need to make sure that you then don't enter the full pay in the Pensionable Pay box, but just the QE amount. You can then allow NEST to auto calc, but can override where their answer is different to yours by rounding amounts.

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to jcace
21st Nov 2017 09:40

Will try that way, thank you

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21st Nov 2017 09:59

It looks like the "Group" setting in NEST has been set up incorrectly. This is where NEST calculates the expected contributions from.

I'd give NEST another call & explain that the group setting uses total pay but you need it to use qualified earnings. They will talk you through the changes.

Hope this helps.

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