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Auto-enrolment - where should the deductions be calculated

piratepirate Trusted RegularRegistered Posts: 469
Do anyone know which takes precedent in the calculation of the pensions contributions - the payroll software or the pension software?
I would have thought it to be the payroll software as this is responsible for other deductions.

If the pension environment is calculating it differently, in this case NEST - should that be taken in precedent?
This is because NEST is being done on auto calculation and is done on the yearly salary divided by 12, rather than on the monthly salary.

I am unable to find the definitive answer to this can anyone advise

Many thanks
Londina

Comments

  • LondinaLondina Experienced Mentor MAAT, AAT Licensed Accountant Posts: 814
    good question Pirate, I was wondering the same! this is not clear and despite the amount of theoretical information, there is little explanation how does exactly works!

    can the AAT give a bit advice too for MIPs??
  • StuartWStuartW Online Community Manager LondonRegistered Posts: 472
    We asked this question on The Pensions Regulator's Facebook page, and got the following response from one of their fans:

    "I take the payroll software - we include overtime which is variable so I override the pension figures as they a percentage based on salary only. Hope this helps."
  • NpsNps Experienced Mentor Registered Posts: 782
    On a similar note but not directly related to the original question, we use the pension calculations as in our case, Sage does not calculate the contributions correctly for employees who use salary sacrifice.
  • payrollpropayrollpro Trusted Regular Hampshire/SurreyRegistered, Working Together with HMRC Posts: 418
    Interesting questions, firstly my view is that if the business is using "middleware", a pension provided piece of software which sits between the payroll and the provider then it is the middleware calculations which must adhered to, not the payroll, payroll is simply there to feed raw data into the middleware for calculation purposes. The response from the middleware will be the deductions to take. If there is no middleware, and with Nest there is no middleware, then it is payrolls responsibility. I'd say that if there is a discrepancy between Nest and the payroll then you need to sort it out because both are supposed to be working from the same core data. On the second issue AE regulations permit salary sacrifice as a method of funding the contributions. I'm puzzled though because under SS the employee makes no contributions, the employer absorbs all of it. If SS is used for other things then I agree you have a problem because SS reduces pay for NIC purposes and it is pay for NIC purposes which is assessible for AE. Sage needs to sort it out, and fast.
  • LondinaLondina Experienced Mentor MAAT, AAT Licensed Accountant Posts: 814
    @payrollpro , what about taxes, are the pension figures tax free or are paid net? In case of deductions, is it the same 20% as income tax?

    I can't believe there isn't a proper guide for accountants regarding these issues with pension auto-enrolment!
  • goldringgoldring Feels At Home Registered Posts: 45
    I'm also struggling to figure out a few things.

    1. If overtime pay varies every pay period, does that mean contributions have to be recalculated every pay period
    2. if someone was eligible then income reduced, would that means contributions shall be recalculated as well, what if he becomes entitled workers in terms of criteria , does employee still has to make the same contribution, and how about employers?
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