Double-check your company’s pension contributions to avoid underpayments

The Price Bailey Payroll team are becoming increasingly aware of pension contributions that are being set up for companies incorrectly by their pension providers.

If you are having issues with your providers, then it is important to make sure that your pension contributions are correct. This will prevent underpayments.

Employee pensions can be incorrectly set up due to a range of factors, including:

  • being based on various pension tiers or,
  • pensionable pay

It is vital to know what tier basis your pension scheme is set up with and the pensionable pay to ensure the contributions are in line with (or above) the minimum level per scheme.

There are three different sets for which your business could qualify:

Set 1 – A total minimum contribution of at least 9% of pensionable pay (at least 4% of which must be the employer’s contribution), or

Set 2 – A total minimum contribution of at least 8% of pensionable pay (at least 3% of which must be the employer’s contribution), provided that pensionable pay constitutes at least 85% of earnings (the ratio of pensionable pay to earnings can be calculated as an average at scheme level), or

Set 3 – A total minimum contribution of at least 7% of earnings (at least 3% of which must be the employer’s contribution) provided that all earnings are pensionable.

There is also a fourth basis for which a business could qualify. This does fall under set 2; however, it’s managed very differently. With this basis, pensions are based on earnings between a Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL) of £6,240 to £50,270.

The qualifying earnings are made up of any of the following components: salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay.

As employers are responsible for meeting the legal duties for automatic enrolment, failure to comply may result in compliance and/or penalty notices.

The Payroll team at Price Bailey LLP has successful experience in rectifying previous providers’ pension contributions.

If you are having issues with your current Payroll provider or would like support resolving backdated pension contributions, then you can contact Zoe Masterson an assistant Payroll manager at Price Bailey LLP using the form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

Subscribe

For more insight, events and webinars, sign up to the Price Bailey mailing list…

Sign up

 

 

Have a question about this post? Ask our team…