Q: Pension schemes

Before you set up your software, you need to know exactly what type of scheme your company operates. If you need help, please contact your pensions advisor. You can also get guidance from the the pensions advisory service website.

• Changes to pension legislation mean that employers must ensure that all employees have the opportunity to save for their retirement through a suitable occupational pension scheme. Find out more about the pension reforms.
• Employees can no longer contract out of the state pension using a COMP scheme. These schemes use NI categories F, G and S. Employers should have been notified in advance about these changes. You may need to change the details of the pension scheme you operate. You should also check the NI category used in the employee’s record. Please contact your pension advisor for advice.

Contracting out means leaving the State Second Pension. If you are an employee, you can do this by joining a contracted out occupational pension scheme, a personal pension or stakeholder pension scheme.

If you choose to contract out, you lose some or all of your entitlement to the State Second Pension. This should only be for the duration that you're contracted out. Your right to the basic State Pension is not affected. If you need more information, please contact your pensions advisor.

The Contractual check box should be selected if the employee has joined the pension scheme as part of their employment contract instead of automatic enrolment. The terms and rules for contractual enrolment differ from that of automatic enrolment and they shouldn't be confused.

For information on the differences between contractual and automatic enrolment, please refer to The Pension Regulator (TPR) website - http://www.thepensionsregulator.gov.uk/docs/contractual-vs-automatic-enrolment.pdf

To contract out you must be:

• Earning at least the amount set by the lower earnings limit, and
• Paying, or treated as paying, standard Class 1 national insurance contributions on those earnings.

This means that the following people cannot contract out:

• The self-employed.
• Those not in employment.
• A married woman who has chosen to pay reduced rate national insurance contributions.

Can an employee stop their membership of a qualifying pension scheme after the opt out period has passed?

Yes, just like any other pension scheme, an employee can choose stop their membership of a qualifying scheme at anytime. In these cases, they should contact their pension advisor for advice.

You can set up the following types of pension schemes:

Type	Description
Contracted Out Salary Related (COSR)	Employees on COSR schemes receive NI relief by being assigned a specific NI category, resulting in reduced NI contributions. Employees contributing to COSR schemes can have NI Categories D, E or L. The pension contribution is deducted before tax is calculated.
Contracted Out Mixed Benefit (COMB)	Pension contributions for this type of scheme are deducted before tax, unless the scheme is marked as Stakeholder Friendly, when it is deducted after the employee’s tax is calculated. Employees contributing to COMB schemes can have NI categories D, E or L.
Contracted In Salary Related (CISR)	The pension contribution is deducted before tax is calculated. Employees contributing to a CISR pension scheme are allowed to have NI categories A, B, C, J or X.
Group Personal Pension (GPP)	This scheme is not a contracted out scheme, therefore NI contributions are at the standard rate. The pension contribution is not taxable, but the employee must pay tax at source, which the pension provider can reclaim from the Government and add to the employee’s pension fund. Employees contributing to a GPP pension scheme can have NI categories A, B, C, J or X.
Personal Pension Plan (PPP)	This scheme is not a contracted out scheme, therefore NI contributions are at the standard rate. The pension contribution is not taxable, but the employee must pay tax at source which the pension provider can reclaim from the Government and add to the employee’s pension fund. Employees contributing to a PPP pension scheme can have NI category A, B, C, J or X.
Stakeholder	A stakeholder is one of the more basic and flexible pension schemes. All employers with five or more employees may have to make a stakeholder pension scheme available to their employees within three months of them being affected by stakeholder requirements. The pension contribution is tax-free, but the employee must pay tax, which the pension provider then reclaims from the Government, and adds to the employee’s pension fund. Employees contributing to a stakeholder pension scheme can have NI category A, B, C, J and X.

Company > Pension Schemes. For help, see Managing pension schemes.

It's easier to use your software to calculate the amount of employer and employee pension contributions. However, if a pension scheme has been set up to correctly you can manually enter both employee and employer pension contributions when paying your employees using the Enter Payments option.

Entering pension contributions manually

1. Payroll > select the required employees > Enter Payments > Summary.
2. Deduction section > Pension Contributions > finder button .

3. Pension (Current Period) box > enter the amount of pension contribution for the employee.

   If you are advancing payments, use the Pension (Advanced Period) box to enter the pension contribution for that period.

Note: You can not enter Additional Voluntary Contributions (AVCs) for pension schemes with manually entered contributions.

4. To save your changes > OK.

Alternatively, you can use one of the default pension schemes. You can amend some of the settings to suit your needs. Find out more.

You can assign a pension scheme in two ways:

• To assign a scheme to more than one employee at the same time, use the Global Changes option. See Making global changes.
• To assign a scheme to a single employee > Employee > select the required employee > Employee Record >  Pensions > Manage Schemes > Add.

Yes.

1. Payroll > select the employees you want to pay > Enter Payments.
2. To open the record of the employee required, choose Employee on the toolbar > Employment > Pension.

You can delete a pension scheme in two ways:

• If the scheme is not assigned to your employees, you can delete at a company level.

  1. Company > Pension Schemes > select the pension scheme from the list > Delete.
  2. If you are sure you want to delete the selected scheme > Yes.

• If the scheme is assigned to your employees, you can remove the scheme from the appropriate Employee Record.

  1. Employee > select the employee from the employee list > Employee Record
  2. Pensions > Manage Schemes > Pensions list > choose the scheme you want to remove > Delete.

  Note: You can't delete schemes with current year-to-date values.

Yes. To set up salary sacrifice deductions for childcare vouchers, or fixed amount salary sacrifice arrangements such as cycle to work schemes, see Setting up a salary sacrifice deduction.

What do the pension reforms mean and where can I find out more?

Employers must ensure that all employees have the opportunity to save for their retirement through a suitable occupational pension scheme. These changes are being introduced gradually for employers, based on the number of people paying tax through your PAYE scheme.

To find out how these reforms affect you, see Pension reforms.

Yes, all eligible employees must be automatically enrolled into the pension scheme, provided they aren't already a member of a suitable scheme. Eligible employees are those aged between 22 and the state pension age, who earn more than a specified amount each year - £10,000 for the 2014/2015 tax year.

The following employees are not required to be automatically enrolled, but they can choose to join a scheme. In each case the specified earnings amount is £10,000 for the 2014/2015 tax year:

• Those aged between 16 and 22 who are earning more than the specified amount each year.
• Those aged between the state pension age and 75, who are earning more than the specified amount each year.
• Employees earning less than the specified amount each year.

How do I set up pension schemes in my software?

Pension schemes are set up at a company level and assigned to employees in their employee record. For help setting up a scheme, see Managing pension schemes.

Can an employee opt out of membership of a qualifying pension scheme?

Yes, an employee has the opportunity to opt out provided the employer has given them enough detail about the pension scheme to make this decision. If they still choose to opt out, they must provide the employer with a completed opt out notice within one month of their enrolment.

Can I start operating a qualifying pension scheme before my staging date?