Use this window to define the pension schemes to which the employee, the employer, or both, can make contributions. You can then attach employees to one or more of these schemes. A pension scheme definition acts like a template, and provides information that fills several fields in an employee’s pension record, but you can use the Pensions window to change the pension details provided by default in an employee’s pension record. The settings in a pension scheme record are used during the payroll calculation and the necessary deductions are made when there are contributions by employees.
Contributions to a pension scheme are based on the rate type. In some pension schemes, employee contributions are a standard rate, and are typically a percentage and/or a value. This is a Standard Rates scheme. In other schemes, contributions are based on pay bands. This is a Contribution Bands scheme.
For example, in a standard rates type of scheme, an employee might make a contribution of 6% of salary, and an employer might make a contribution of 10% for the employee to the pension scheme. In a banded pension scheme, you can set up several pay bands, such as £1 – £11,999.99, £12,000.00 – £13,999.99, £14,000.00 – £17,999.99, and so on, as shown in the following table. Each band has an employee’s contribution percentage associated with it. For example, for the band £1 – £11,999.99, an employee’s contribution might be 5%.
In a banded scheme, the pension contributions employees make depend on the following:
- the employee’s income and the pay band into which the employee’s income falls
- the band method, which determines how the system identifies the pay band for the employee, which it uses to determine the employee’s pension contribution. You can set Band Method to Each Calculation or Fixed Update.
- the band reference, which determines the value the system uses to determine the band. You can set Band Reference to Pensionable Pay or WTE.
Click New to define the details for a pension scheme, or click Edit to change the details for the selected scheme. The Pension Scheme window is displayed. After you enter the details to create a pension scheme definition, or after you update the details, click Save to save the information.
If you update the values for a pension scheme to which employees contribute, a message is displayed that asks you if you want to update all the employee pension records to reflect the changes. If you want to update all the employee pension records, click Yes. The system updates all the employee pension records, except for those records in which the Fixed field is set to Yes. Instead, if you want to apply the changes to a selected set of employee pension records, rather than all employees, you can click No and use the Pension Rate Changes wizard to select a query to identify the specific employees whose pension records you want to update.
For information about the details you enter on the References tab, click here.