Set up a pension scheme

Follow this guide to set up an Auto Enrolment (AE) pension.

Add Scheme Pay Definition #

Company Setup > Pay Definitions > Add…

Select the Company

Select the Pension scheme Pay Template. You will normally require a single scheme, but you can add as many schemes as needed – for example, if directors receive higher contributions than employees

If you have multiple schemes, then you will need to give each one a unique Name. The Description is usually the same as the name :

Scheme settings #

First, select the Scheme provider, and the respective settings will then appear:

There are a large number of settings which are normally decided by company policy and/ or the pension provider scheme.

Name #

Add a name for the scheme e.g. NEST Directors

Reference #

This must be the scheme reference – usually letters or numbers for the scheme e.g. EMP123456

Type #

Choose from Salary Sacrifice (SS), Net Pay Arrangement (NPA) or Relief at Source (RAS). These all worked differently and provide different levels of tax relief. Net pay arrangement (NPA) and Salary sacrifice are taken from gross pay; Relief at source (RAS) is taken from net pay.

Age Stop #

Usually leave this as the default Do Not Stop. But if you want the contributions to stop at a particular age, set here.

Pay After Leaving #

Usually, this will be unset as pension contributions do not continue for leavers.

PRP (Pay Reference Period) Alignment #

There are 2 types of Pay Reference Periods – either aligned to a Calendar period e.g. 1st to 31st of the month or the Tax periods (tax week or tax month). This will usually be defined by the scheme pension scheme provider.

Postponement #

If you don’t operate postponement (deferral), the 3 postponement fields should left as the default None.

If you operate postponement, the usual option is Maximum which will apply a 3-month postponement. This can be from when your duties start (when you became an employer if applicable), or when the employee becomes eligible (e.g. Age 22) or when new employees start. Usually, all 3 settings would be set the same way.

The other options are the Next PRP if you just want to move postponement to the next pay run, or the Latest PRP if you’d like everyone to start on the first day of the latest pay run rather than for example in the middle if 3 months postponement were applied.

Company contribution #

Set the company contribution percentage. This will then apply to all employees using the scheme. e.g. 3%.

If you intend to use fixed values rather than % values, then you need to select the Type as Unbanded below

Matching #

if you operate matching, where the company contributions will increase based on the worker percentage tick this box. Otherwise, leave it un-ticked.

Multiplier #

Usually, this is left at zero. But if you want to multiply the company contribution, for example to provide an NI saving to the employee, you can put the 12% NI rate here as 0.12.

Group #

This is the group name as required by the pension scheme. e.g Directors Group

Contribution basis #

There are two types of contribution bases:

  • Banded which starts at a lower band and stops at an upper band – this is the usual type for newer automatic enrolment schemes and have minimum levels
  • Unbanded where pension contributions start from zero and no upper limit on earnings – this is the type for classic pension schemes and can be set to any value

On Leave pay basis #

When an employee is on leave, for example, maternity leave, you can choose to continue company contributions based on the pay as actually paid (as paid), the salary before the leave, Average Weekly Earnings (AWE) before leave or the Higher of Salary or AWE.

Round up #

Usually leave un-ticked.

Payment source #

The payment source you are using for the payment provider. e.g. My Bank

Click Update to Save the scheme

Pay Item Editor #

Next, you will add the scheme to an employee. Navigate to the Pay Item Editor

Search or select the employee

Select the Scheme and Worker % on the AE Pay Item

Click Update to check the payslip


f you need to make any changes, go back and edit the scheme accordingly

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