PENSIONS INSIGHT
Automatic enrolment and pay reference periods
The Pensions Regulator provides guidance on this crucial issue
O ne of the considerations to take into account when automatically enrolling staff into a pension scheme is which pay reference period (PRP) is used within payroll software when calculating contributions. While some software providers offer a choice, others will only support one – either tax or calendar period PRPs. Which PRP is used is important to know when automatically enrolling staff in order to ensure the correct pay period is used, timely communications are issued to staff, and correct pension data feeds are sent to the chosen pension provider. There are two types of pay reference periods: l tax period based PRPs – where the PRP
...there are practical differences to be aware of when automatically enrolling staff for the first time
is the tax period used for the payment of wages/ salary l calendar based PRPs – where the PRP is based on the period of time over which the regular wage or salary is paid. Although both types operate in very similar ways there are practical differences to be aware of when automatically enrolling staff for the first time. The table on the following page highlights the differences, and assumes two identical employers, both staging on the same day, but with one choosing to
use tax period based PRPs and the other choosing calendar based PRPs (where the PRP runs from beginning to end of the calendar month): l both have a staging date on 1 November 2016 l pay day is 25th of the month l both have one monthly paid worker who is 25 years old and paid a salary of £12,000 per annum l the qualifying pension scheme rules require a pro rata contribution to be taken if the member of staff is enrolled part way through a PRP l both employers have a policy of applying postponement to the start of the next PRP, when possible, if a member of staff triggers automatic enrolment part way through a PRP. n
Questions to ask l Does the payroll software yourself or your clients use support both types of PRP? For instance, some software providers only support tax period PRPs. l Can the payroll software calculate pro rata contributions if the scheme rules require it? If not, use of postponement may be necessary. l Do the pension data files generated by the payroll system align with the period dates set up with the pension provider (e.g. pension provider expecting contributions for 1st to 31st but payroll data quotes 6th to 5th and data is rejected)? l How frequently does the pension provider expect to receive the contribution data files? It is not uncommon to find they will only accept monthly files and weekly payroll data has to be combined / aggregated.
Useful link Detailed guidance for employers:
Appendix E: The relevant pay reference period for the purposes of the minimum contribution entitlement : http://bit. ly/1MzTVn1.
| Professional in Payroll, Pensions and Reward | November 2016 | Issue 25 42
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