PENSIONS
W hen automatic enrolment (AE) was introduced way back in 2012, it required employers in the UK to automatically enrol certain employees into a workplace pension scheme and contribute towards it. This meant it became a natural extension of the payroll process, with employers looking to the payroll department to assist in the administration and compliance of the workplace pension scheme. In a research and analysis report conducted by the Department for Work and Pensions, to understand employers’ views and experiences of AE, they found employer pension engagement was often influenced by the amount of knowledge and resource they had. Most employers believed overall employee pension engagement was low, with many not being aware of where or what their pension was. This also meant employers didn’t see pensions as a priority. This lack of engagement could be the reason why so many errors have occurred since the introduction of AE. Throughout my payroll career, I have found that many employers, from a one-man band shopkeeper with three employees, to a multi-national tech company with 200+ employees, find it difficult to administer their pension schemes accurately. These errors can then be costly and difficult to rectify. Confusing terminology I remember back when I was a trainee administrator, the terminology of pension schemes was a confusing minefield. I couldn’t fathom why a pension scheme with net pay in the title was calculated from the employee’s gross pay. Also, with RAS, was the source not actually the payroll? Due to the confusing names of the schemes, I’ve seen employers misunderstand what the two tax relief methods mean and get them back to front. So, what are the fundamental differences we need to keep in mind when we administer a workplace pension? l NPA: pension contributions are taken from the employee’s gross pay before tax is calculated. The employee will therefore pay less tax because this will be calculated based on a lower amount
Do you know your RAS from your NPA? Georgina Ward MCIPPdip, head of payroll, DJCA, discusses the important differences between relief art source (RAS) and net pay arrangement (NPA) pension schemes
| Professional in Payroll, Pensions and Reward | May 2023 | Issue 90 44
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