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Pension Contributions

  • Associate
  • Practice Licence
  • 27 posts
  • # 113483

Hi All

i am processing AE for the first time for my client but the employer and employee pension deductions are different.  My understanding was that they should be the same?

 

I use sage one payroll software.....does anyone know where i might have gone wrong please?

Thanks

Karen

  • 115 posts
  • # 113484

Hi Karen

It depends on the pension provider and how they deal with the tax rebate. I use Nest and Now Pensions, and with Now the two contributions are the same, but with Nest they are different. Like I say, it`s to do with how the 20% tax rebate the employee gets on their contribution is dealt with.

Steve

  • 491 posts
  • # 113490

Hi Karen

What Steve is saying is correct - for example...

Basic Monthly pay £1,331.11

1% employee contribution with NEST on qualifying earnings is £6.76 after their 20% tax relief that the Government makes up

1% employer contribution with NEST on qualifying earnings is £8.45 - a straight 1% on all earnings over £486 (qualifying earnings)

 

Another reason for a difference is if one system is using qualifying earnings and another system is using all pensionable pay in the calculation

Carol

  • Associate
  • Practice Licence
  • 27 posts
  • # 113499

Thank you both. x


I am, rather embarassingly, struggling to understand all of this however :(


I spent over 3 hours today on the phone with Nest and Sage One payroll.  I managed to establish that Nest operates on qualified earnings and they deduct before tax.  This wasn't set up like that in sage One.  So basically i processed payroll in sage one and initially noticed that the employer and employee columns weren't the same.  That made sense what Steve said that that was because Sage One was adding the Tax relief.  Then when i tried to upload the file into Nest it said the dates didn't tie up.  I then established this was because of sage being set up with earnings periods of 6th-5th monthly whereas Nest was set up 1-31st Monthly.


We changed the set up in Nest to reflect Sage.


Sage helpdesk then changed the details from pensionable pay to qualifying earnings and recalculated the Pension deductions. This changed the tax deductions. 


We then went back to Nest and put the gross pay into the employees details but it still came up with difference deduction amounts to sage.  Sage were saying this was because they were allowing for 1-5 of July from pay period 3 whereas Nest were saying they couldn't.


Nest got me to enter the pension deductions into their system without declaring any earnings.  I wasn't happy with this but had to go with what they were advising.....after all they should know shouldn't they?


My questions are;

why don't sage and Nest agree?

why would the tax change after sage made the changes to the set up?

and

what is the difference between pensionable earnings and qualifying earnings?


i'm worried i'll have similar issues next month!

Very grateful for your time in helping me out with this!


Karen x

  • 491 posts
  • # 113502

Hi Karen

I feel for you - I've been through a steep learning curve like this too - though mine is with Moneysoft Payroll Manager and NEST, so it's maybe not been quite as painful. I'm afriad I don't know how SAGE payroll works, so can't comment on how to set NEST up with SAGE - only NEST with Moneysoft.

From my experience, it could be that in order to have changed the pay period from 1st to 30th to 6th of one month to 5th of next, you will have had to change the 'GROUP' from monthly, to TAX monthly. When you change a group, it takes overnight for these to update on the NEST site, which is why they will have talked you through doing the calculations the way they did - probably using the Exceptions submission, rather than the normal method of Contribution Submissions.

Also, once the GROUP has updated, you have to ensure the WORKER is changed into that GROUP, and that that has updated (overnight!) So providing you revisit this in a day or two and make sure its 'prepared' for next month, it should go much more smoothly for you 'uploading' wise. 

Don't forget to click on the 'PAY' button in NEST though - to make sure that you instruct NEST to actually take the Direct Debit, this doesn't action unless you hit that button!

The difference between pensionable pay and qualifying earnings is this:

Pensionable pay - all basic salary income from £0 - see a bit more on this here http://www.thepensionsregulator.gov.uk/docs/dg-4-appendix-f.pdf 

I may be wrong - but I think you can exclude overtime and bonus from this calculation - but I don't have anyone on this scheme as yet, so haven't studied it yet

Qualifying earnings - this is linked to the NI earnings levels - so is all pay - including overtime, bonus etc, but doesn't start until £486 per month / £5,824 per annum

More here http://www.thepensionsregulator.gov.uk/automatic-enrolment-earnings-threshold.aspx 

Hope this helps to clarify a bit more..........! The Pensions Regulator Site and the NEST site have loads of info on this - you really need to study it in detail if you're going to understand it better!

  • Associate PM.Dip
  • Practice Licence
  • 739 posts
  • # 113515

Hi Karen 

 

Has everyone else has said With Nest the employer and employee contributions are different because of the tax relief. I had this problem when i did my first Nest one. If you put in the qualifying earnings it will tell you what the contribution should be. I dont use sage one payroll but if it isnt giving the correct amounts you may need to go into the sage pension settings and alter the type of scheme. the dates on the payroll upload should be 1st to 31st of each month. 

 

Nest is a Group Personal Pension scheme, youmay have to put that into sage one before it works correctly.

 

Hope you sort it, when once you get it to match once, the other months will follow and be correct. 



Edited at 01 Aug 2016 05:39 PM GMT

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