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Phil11_2
July 16, 2019
Question

Pension Contributions - (NEST - auto enrollment)

  • July 16, 2019
  • 2 replies
  • 0 views

Our staff are enrolled in the NEST pension scheme.

The employer and employee each contribute 4% of their gross salary.

NEST do not operate a Net Pay Arrangement 

https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/calculate-tax-relief-with-earnings-basis.html

Instead they claim back the nominal tax paid by the employee (even if they are not actually paying that amount of tax)

So we deduct 3.2% of the employees gross pay (80% of 4%) and pay this to NEST

NEST reclaim the extra 0.8% from the government to get the 4% employee contribution.

 

The employee contributions are set up in QB Desktop's payroll module, but I think incorrectly.

They are calculated as 3.2% of GROSS PAY

They are not  set as "earning"

They are not set to change any of the taxes payable

(The on screen prompts suggest that 'auto enrollment payments under a net pay arrangement' should affect income tax - but NEST do not operate a Net Pay Arrangement, and the employee should be taxed on the their full salary.

 

Reviewing employees P45 we have noted that the taxable pay reported excludes their employee pension contributions, and these are shown a 'deductions from their gross pay'

 

The implication is that employees have not paid the correct amount of tax, and we need to 'get this right' - can anybody provide a worked example or template that we can follow?

 

The employee contributions must be calculated as a percentage of the gross salary - and deducted from their taxed income - after payment of tax and national insurance, and I would expect the gross income reported on their P60 / P45 etc to include the amount deducted in pension contributions.

 

 

 

2 replies

J
JanyRoseB
July 16, 2019

Hi there, @Phil11_2.

 

Thanks for taking the time posting your concern here in the Community. I'm here to guide you to the right support who can help you with the pension scheme. 

 

I'd like to acknowledge your effort in sharing very detailed information about your concern. Intuit wants to make sure our customers are compliant with their state guidelines. In this case, I recommend contacting our QuickBooks Desktop Payroll Support Team so they can check the calculation of your contribution and make an adjustment if necessary. 

 

You can contact our customer support through this link: https://quickbooks.intuit.com/uk/contact/. 

 

You may also check this article to learn more about the auto Enrolment for workplace pensions in QuickBooks Desktop. 

 

Please know that you're always welcome to post if you have any other concerns. Have a good day ahead. 

P
Phil11_2Author
August 27, 2019

We have contact support - and given them remote access - but they they could not identify the problem - they though we had done it correctly.

We have since confirmed that Employee's Pension Contributions have been incorrectly deducted from their gross pay (before tax)

Can you provide detailed guidance for a pension scheme that does not operate a NET PAY Arrangement?

(X % of gross pay, should be deducted from Net Pay (After TAX), and must not modify taxable income shown on P60 & P45 forms)

What are the setting for a payroll item that achieves this?

 

M
Mark_R
August 27, 2019

Thanks for getting back to us, @Phil11_2.

 

Allow me to step in and provide some information about the pension scheme in QuickBooks Desktop (QBDT).

 

The pension scheme calculate depends on how you set up the year to date of the employee on the P45 and P60 form. It'll also matter on how you setup your Pension item and the payroll dates you've run.

 

When you enroll for workplace pensions, you'll need to enter the default contribution rates. This way, the pension scheme will properly operate a net pay arrangement.

 

You can check out this article for more details: Auto Enrolment for Workplace Pensions.

 

Also, I suggest seeking help from your accountant about the payroll item that deducts the percentage of gross pay from net pay. This way, they can advise which account to use when setting up a payroll item.

 

You might want to read this article to learn how to print P60 forms in QuickBooks Desktop: Print P60 Forms in QuickBooks Desktop Payroll.

 

Please feel free to post any other questions you have below. The Community and I are always here to help you out.

C
CPS Payroll
April 15, 2020

Did you get to the bottom of this or did you cancel subscription.
I am having problems too 😡

    A
    Ashfield11
    April 15, 2020

    In the end I set up the pension manually rather than through the pensionsync function. That way I could choose Relief at Source rather than Net Pay. 

     

    That way it would take the 5% pension off people with the tax relief already claimed and didn't affect the taxation calculation. 

     

    The only other work around was overwriting some employees pension up to 6.25% to then take their contribution back down to 5% as it was calculating it as relief at source. Not sure if that is right but was the only way round it in the short-term. 

     

    Hugh

    F
    forestofmercia
    July 17, 2020

    HI,

    Did you manage to find a long term solution to this problem in the end?

    Even though I have set my pension contributions to 5% quickbooks has been calculating it at 4%.

    When I rang them they said its something to do with tax cant be changed. When I said I need to meet minimum pension contributions they said to put a higher percentage in until I got the right value.

    Like you it is 6.25%

    Accountant says its not ideal but he cant see any other way of doing it.

    Surely this is some sort of software problem with quickbooks?

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