This is how to set up AW-APPS Payroll to calculate and record pension contributions for a deduction-at-source pension scheme such as that provided by NEST pensions (see www.nestpensions.org.uk) or The People’s Pension (see thepeoplespension.co.uk). With these schemes, the employee only contributes the net amount after tax relief. So where the basic contribution is 1%, the employee only has 0.8% deducted from gross pay, and the other 0.2% is claimed from HMRC by the pension scheme provider. Please note that this example does NOT apply to those schemes known as netpay schemes, which would require different settings in AW-APPS Payroll..
Example for tax year 2018-19:
Make sure you are using the latest version of AW-APPS Payroll
Employee earns £325 per week, weekly paid
Pension contributions calculated as a percentage of Qualifying Earnings as defined at tpr.gov.uk
Employee percentage 3%
Employer percentage 2%
Settings in AW-APPS are:
AE_enrolled = Y
AE_netpayScheme = N
AE_enable_autocalc = Y
AE_useQE = Y
Next payday tab:
AE_percentage = 3
AE_percentage_employer = 2
These settings will produce the following deductions on the Next payday tab:
PENSION_other = 5.02
PENSION_contrib_employer = 4.18
Employee (325-116) x .03 x 0.8 = 5.02
Employer (325-116) x .02 = 4.18
Note: The employee contribution is net of the 20% tax relief as required.
If you are using NEST pensions and are completing a Contribution Schedule on the NEST website, show the qualifying earnings only (325-116 = 209 in the Earnings box and also check the Auto-calc check-box. The current qualifying earnings deductions are shown on the Tax NI tab as AE_thresh1_wk and AE_thresh1_mn in AW-APPS Payroll.
The 2018-19 values are £116 for weekly paid and £503 for monthly paid.
The use of Qualifying Earnings is the minimum requirement. Some employers choose to base pension contributions on gross earnings without deduction (AE_useQE = N). Please check your scheme rules. In this case you would enter the gross pay in the Earnings box on the NEST website.