Using Payroll Manager with Royal London Pensions

Note: This guide has been designed to work with the latest version of Payroll Manager. The area of ‘Auto Enrolment’ is fast moving, and we are adding extra features / software modifications on a regular basis. We would encourage you to update your version of Payroll Manager before proceeding with this guide. (Click ‘Help’ then ‘Program Update’ from the main menu in Payroll Manager to update).

New legislation on workplace pensions (‘Automatic Enrolment’) brings many new duties for the employer. This guide is NOT designed to inform you of these new duties. You should consult with your pension scheme provider and The Pensions Regulator website in order to fully understand what is required.

This guide is specifically designed to show how Payroll Manager can help with the Auto-enrolment process and is split into 7 sections:

  • 1. Your Staging date
  • 2. Adding the details of your Pension Scheme
  • 3. Employee Assessment
  • 4. Adding Employees to the pension scheme
  • 5. Pension Contributions
  • 6. Communicating with employees
  • 7. Producing CSV upload files to send to your pension provider

 

1- Staging Date

Every employer has a date from when the automatic enrolment duties come into force for their business. This is called an employer’s ‘staging date’. If you already know your staging date then enter it by clicking ‘Employer’ from the main menu, then ‘Employer Details’, then click on the ‘Auto-Enrolment pensions’ tab.

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If you do not yet know your staging date then please refer to The Pensions Regulator website www.tpr.gov.uk/staging which includes a tool for finding this out.

The ‘Auto-Enrolment pensions’ screen also contains boxes where you can enter a ‘Re-enrolment date’ and a ‘Deferment / postponement date’

  • It is important that you enter your staging date into Payroll Manager before proceeding further.
  • The Re-enrolment date’ field should be left blank at this stage. (Re-enrolment relates to the automatic enrolment of workers who may have opted out of your pension scheme, and does not take place until 3 years following your staging date).
  • If you are using postponement to postpone automatic enrolment for all of your employees from your staging date then enter the relevant date in the ‘Defer/postpone until’ box, otherwise leave this field blank. You should refer to The Pensions Regulator website if you require more information on postponement.

Click ‘OK’ to save this information.

 

2- Adding Pension Scheme details

Click ‘Pensions’ from the main menu, then click ‘Pension Scheme Details’

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The tabs along the top of this screen allow you to add the details of up to 5 different pension schemes.

VERY IMPORTANT: If you have employees that are paid at different pay frequencies (e.g. some weekly and some monthly paid employees) then you should create a separate pension scheme within Payroll Manager for each pay frequency and name them accordingly (e.g. ‘Royal weekly’ and ‘Royal Monthly’).

Click on the first available tab along the top of this screen.

  • Name
    This is the name by which you wish to refer to the pension scheme. This will appear on the Pay Details screen and on all reports. e.g. enter ‘Royal London’ or similar in this field.
  • Reference –
    An optional field where you can add your own reference to appear on reports. You can leave this field blank if you wish.
  • Provider type –
    Select the pension provider from the drop-down list. i.e ‘Royal London’

Tax Relief – you should select one of the following 4 options:

  • No tax relief –
    Select this option if the pension scheme does not allow for tax relief on their members pension contributions (a very unusual circumstance). This box is selected by default, but in the majority of cases you should select one of the remaining 3 options instead before proceeding:
  • Basic rate tax relief at source
    This option should ONLY be selected for pension schemes where the pension provider claims tax relief on behalf of the employee and adds it to the employee’s pension pot.
  • Net pay arrangement
    This option should ONLY be selected if the pension scheme operates under ‘Net Pay Arrangement’ conditions (i.e. the pension deduction is taken before the calculation of tax, so that tax relief is claimed via the payroll).
  • Salary sacrifice/exchange
    Salary sacrifice is an arrangement where a worker agrees to give up part of their salary and in return their employer pays it into their pension pot as part of their employer contributions. Because of this the worker receives a lower salary. If you have taken specialist advice and have decided to use a salary sacrifice scheme which meets HMRC requirements and complies with your employer duties then select this option, otherwise select a different option.

Additional Voluntary Contributions (AVCs):

  • This pension has AVCs –
    Tick this box if employees wish to make Additional Voluntary Contributions to their pension schemes, otherwise leave un-ticked. If unsure as to whether or not your pension scheme allows for AVCs then please contact your pension provider.
  • Net pay arrangement for AVCs –
    Tick this box if Additional Voluntary Contributions are subject to the Net Pay Arrangement, otherwise leave un-ticked.

Earnings basis – select one of the following options:

  • % apply to all pensionable pay –
    If you wish the pension contribution to be calculated on all pensionable earnings (i.e. from the first pound of pensionable earnings) then tick this box, otherwise leave it un-ticked.
  • % apply to banded qualifying earnings only –
    If you wish the pension contribution to be calculated on qualifying earnings only – i.e. those earnings falling between the Lower and Upper thresholds for automatic enrolment (?5,824 and £42,385 per annum for 2015-16) then tick this box, otherwise leave it un-ticked.

The fields on the right hand side of the screen (Address, Postcode, Telephone etc.) are not used for auto-enrolment purposes and so can be left blank. If you wish to, you could record your pension scheme details here for reference.

Click ‘OK’ to save this information.

 

3- Employee Assessment

Payroll Manager has an assessment tool to help you determine which of your workers need to be automatically enrolled into your pension scheme. It is important that you understand the rules behind this assessment, as there are a number of other duties (such as communicating information to workers) that you will need to perform following the assessment process. Based on this assessment, some of your workers will need to be automatically enrolled into your pensions scheme (the ‘eligible jobholders’), whilst others (‘non-eligible jobholders’ and ‘entitled workers’) have a right to join the scheme if they choose to do so. Your pension provider will be able provide more detailed help and guidance with regards to the meaning of each of these categories. More information can also be found at The Pensions Regulator website.

An assessment is based on an employee’s age and earnings, so you must ensure that you have this information entered into the software first. You should run the assessment on your staging date, and each time that you run your payroll to see if the status of any employee has changed. You can also run the assessment before your staging date if you wish to get a general idea of how many employees are likely to be enrolled into your pension scheme.

Running the assessment

  • Select the relevant pay period on the Pay Details screen.
  • From the main menu click ‘Pensions’ and then ‘Assessment’.

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  • The ‘Layout’ selector at the top of the report allows you to display the assessment information in a number of ways (e.g. by Employee, by Category etc.).
  • The ‘Category’ of each employee determines the next course of action. Again, you should consult the guidance given by your pension provider and / or The Pensions Regulator if you are unsure how to proceed. In general terms employees categorised as ‘Eligible Jobholders’ will need to be automatically enrolled into your pension scheme, whereas ‘Non-eligible Jobholders’ and ‘Entitled Workers’ have the right to join if they wish to.

 

4- Adding Employees to the pension scheme

After following the Assessment procedure you can then add the relevant employees to the pension scheme.

From the main menu click ‘Employees’ then ‘Employee Details’ then click on the ‘Auto-Enrolment pensions’ tab.

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The following details need to be set for each employee.

  • Exclude from assessment –
    This box is un-ticked by default. If you have individuals on the payroll that are not deemed to be subject to Automatic Enrolment legislation (e.g. they are not ordinarily working in the UK) then you can exclude them from the assessment process by ticking this box. You should consult The Pensions Regulator documentation before selecting this option.
  • Auto-enrolment pension –
    Choose the appropriate pension scheme from the drop-down list. ‘Royal London’
  • Category identifier – If your scheme has different categories (e.g. monthly and weekly paid workers) then you will have agreed to assign each worker a category when setting up your scheme with Royal London. You should enter the relevant Category identifier here. If in doubt, please contact Royal London.
  • Enrolment type – Select the correct Enrolment type for the employee from the drop-down list. This field is initially set to ‘unknown’ and must be changed to one of the following:
    • Eligible jobholder – For Eligible Jobholders
    • Non-eligible jobholder – For Non-eligible jobholders
    • Entitled Worker – For Entitled Workers
    • Excluded – For those employees that are either under 16 or over 74.
  • Defer/postpone until –
    If you are using postponement for an employee enter the deferral date here, otherwise leave this field blank.
  • Date joined –
    Enter the date from which the workers enrolment in the pension scheme is effective. This is usually the date that the worker becomes eligible for automatic enrolment.
  • Date left –
    If the employee leaves the pension scheme then enter the leaving date here, otherwise leave this field blank.
  • Date opted out –
    If the employee has opted out of the pension scheme then enter the opt out date here, otherwise leave this field blank.
  • Date opted in –
    If the employee wishes to opt in to the pension scheme then enter the opt in date here, otherwise leave this field blank.
  • Enrolment Date –
    Enter the effective date of the worker’s enrolment into the pension scheme. This is usually the date the worker became eligible for auto enrolment. This field and must be completed if you are intending to send csv files to Royal London..
  • Do not re-assess on the re-enrolment date –
    Leave this field blank at this point. Re-enrolment is a procedure which takes place 3 years after the staging date and applies to employees that have previously opted out of the pension scheme. Employees that opt-out within 12 months prior to the re-enrolment date do not need to be assessed at this point – in which case you would tick this box.
  • Continue to assess –
    If the employee has been assessed as an entitled worker and has then chosen to ‘join’ a pension scheme then you still need to assess them in each pay period to see if they become a jobholder. Tick this box in order to keep assessing such employees.
  • Set contributions % –
    This button allows you to enter the pension contributions for an employee. You could also enter these contributions on the ‘Pay Details’ screen. Section 5 ‘Pension Contributions’ covers this in more detail.
  • Date Letters Sent – (Auto-enrolled, Not enrolled, Postponement)
    Leave these fields blank initially. Payroll Manager will automatically populate these fields as appropriate (see section 6 – Communicating with employees).

A report is available which allows you to check that all employee pension details have been input correctly. Click ‘Pensions’ from the main menu and then ‘Employee Pensions Report’ to produce this report.

 

5- Pension Contributions

The amount that the employee and employer must contribute to the pension scheme is determined by the scheme’s rules and you should contact your pension provider to discuss this. You can enter pension contributions on both the ‘Employee Details’ screen and on the ‘Pay Details’ screen.

IMPORTANT: You should only enter pension contributions for those employees that have actually joined the pension scheme! i.e. DO NOT enter contributions for employees that are not yet in the pension scheme or will not be joining a scheme.

  • a) – Entering pension contributions on the Employee Details screen:
      • From the main menu click ‘Employees’ then ‘Employee Details’ then click on the ‘Auto Enrolment Pensions’ tab.
      • Click on the ‘Set contributions %’ button at the bottom of the screen.Contribution
      • Select the Pension from the drop-down list, enter the date you wish the contributions to begin and then specify the appropriate employee and employer contribution. When you click ‘OK’, Payroll Manager will populate the Pay Details screen with the contributions that you have specified for this particular employee.

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    • Repeat this process for every employee that you wish to enter contributions for.
  • or b) – Adding / editing pension contributions on the Pay Details screen:
    • From the main menu click ‘Pay’ and then ‘Pay Details and select the relevant employee.
    • Click on the ‘Pensions’ tab.
    • You can choose to enter the pension deduction either as a percentage or as a monetary amount.

 

Notes about Tax Relief and the Earnings Contribution basis

If you wish to check that an employee is having the correct pension deduction made from their pay, it is important that you understand how tax relief and the earnings contribution basis affects these deductions.

Tax relief:

  • When using a Relief at Source (RAS) pension scheme, the pension scheme administrator claims basic rate tax relief from HMRC and adds it to the pension pot of the employee. For example, if a member wishes to make a £100 contribution they’ll only need to pay £80 into their pension scheme. The scheme administrator reclaims £20 from HMRC making up the pension pot to £100. If you set the employee pension deduction to 1% in Payroll Manager, using a RAS scheme, the software will calculate a 0.8% deduction and the pension company will reclaim the remaining 0.2%. Contributions made to a RAS scheme do not affect the amount of income tax calculated for the employee as this is based on the whole amount of taxable pay, before the pension deduction is taken.
  • When using the Net Pay Arrangement (NPA), the pension contribution is taken before the calculation of tax. For example, if a member wishes to make a £100 contribution into their pension scheme then a £100 deduction is made from their pay. Tax is then calculated on the remaining amount meaning contributions made to a NPA scheme do affect (i.e. reduce) the amount of income tax calculated for an employee.

How the Earnings basis for contributions affects the deduction amounts:

Different pension schemes allow for different earnings basis on which % contributions are to be calculated (the basis used is agreed between the employer and the pension provider).

  • If using all pensionable pay as the earnings basis, then contributions are calculated from the first pound of earnings e.g. If an employee is paid £1000 month and contributes 1% to the pension using this earnings basis, then the deduction is 1% of £1000.
  • If using banded qualifying earnings only as the earnings basis, then contributions are calculated on the earnings falling between the lower and upper thresholds for qualifying earnings (which for 2015-16 are £486 to £3532 per month). e.g. If an employee is paid £1000 month and contributes 1% to the pension using this earnings basis, then the deduction is 1% of £514 (i.e. 1% of £1000 – £486).

 

6- Communicating with employees

Communicating information to employees regarding auto enrolment is an important part of the new employer responsibilities. Payroll Manager WILL NOT manage this whole procedure, and it is important that you understand which employee should be issued which piece of information at which time. The Pensions Regulator website has a specific section ‘Write to your staff’ which gives detailed information regarding employee communications.

The Pensions Regulator provides three letter templates for use when employees are being ‘automatically enrolled’, for those that are ‘not being automatically enrolled’ and those for whom you are using ‘postponement’. Payroll Manager has each of these templates built-in, to allow you to produce the relevant letter for each employee if you wish.

You can produce these as follows:

Auto-Enrolled

  • Before producing this letter you should have already added the employee to the pension scheme as described in section 4 (‘Adding Employees to the pension scheme’) of this guide
  • From the main menu click ‘Pensions’ then ‘Letters’ and then ‘Auto-Enrolled’, select the relevant employee(s)* and click ‘OK’.
  • A letter will be produced for the employee(s) which you can then print / save as pdf/ email as applicable.
  • If you choose to print / save as pdf / email the letter to the employee then Payroll Manager will ask if you wish to record this fact in the employee’s record. The date will automatically be recorded on the Employees – Employee Details – Auto Enrolment Pensions’ screen.

Not Enrolled

  • From the main menu click ‘Pensions’ then ‘Letters’ and then ‘Not-enrolled’, select the relevant employee(s)* and click ‘OK’
  • A letter will be produced for the employee(s) which you can then print / save as pdf/ email as applicable.
  • If you choose to print / save as pdf / email the letter to the employee then Payroll Manager will ask if you wish to record this fact in the employee’s record. The date will automatically be recorded on the Employees – Employee Details – Auto Enrolment Pensions’ screen.

Postponement

  • From the main menu click ‘Employees’ then ‘Employee Details’ and click on the ‘Auto-Enrolment pensions’ tab.
  • Enter the relevant date in the ‘Defer/postpone until’ box then click ‘OK’
  • From the main menu click ‘Pensions’ then ‘Letters’ and then ‘Postponement’, select the relevant employee(s)* and click ‘OK’
  • A letter will be produced for the employee(s) which you can then print / save as pdf/ email as applicable.
  • If you choose to print / save as pdf / email the letter to the employee then Payroll Manager will ask if you wish to record this fact in the employee’s record. The date will automatically be recorded on the Employees – Employee Details – Auto Enrolment Pensions’ screen.

* Note: You may find it useful to click on the ‘AE Pension’ button when selecting employees to receive these letters.

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7- Producing CSV upload files

Royal London allow you to upload csv files to their website to inform them of employee details, pension contributions etc. Payroll Manager can produce these files for you.

Royal London require that each employee has a ‘Title’ when uploading csv files .From the main menu click ‘Employees’ then ‘Employee Details’ and check that the title of each employee is present. Royal London will accept the majority of commonly used titles (e.g. Mr, Mrs, Ms, Miss, Dr etc.). Royal London can provide you with a complete list.

Payroll Manager is able to produce two types of csv file:

  • – An upload file for enrolling workers into the pension scheme (which Moneysoft calls the ‘Enrolment’ file).
  • – A file containing details of the employee and employer contributions (which Moneysoft calls the ‘Contributions’ file).

You can produce these csv files in the following way:

  • To produce the enrolment csv file for adding members to the pension scheme:
    Make sure that you have the correct pay period selected on the ‘Pay Details’ screen, then from the main menu click ‘Pensions’ then ‘Generate upload files’ then click ‘Royal London’ and choose the ‘Enrolment’ option.
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  • The report shows which employees will be included in the csv file, together with their date of birth and NI number. A representation of how the csv will ‘look’ is shown at the bottom of the report. Click the button marked ‘Click here to create the file’ to create the file and save the file somewhere appropriate.IMPORTANT: You should not use Excel (or any other spreadsheet software) to open your csv files after creating them as this may reformat some fields (e.g. date) and cause a problem when attempting to upload the file to the pension provider. You should contact Royal London for support on how to upload csv files to their website.
  • To produce the contributions csv file:
    Make sure that you have the correct pay period selected on the ‘Pay Details’ screen, then from the main menu click ‘Pensions’ then ‘Generate upload files’ then click ‘Royal London’ and choose the ‘Contributions’ option.
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    You should consult Royal London if you require further guidance on how to upload csv files.

    The report shows which employees will be included in the csv file, together with their NI number, Pensionable pay and Employee and Employer pension contributions. A representation of how the csv will ‘look’ is shown at the bottom of the report.

    Click the button marked ‘Click here to create the file’ to create the file and save the file somewhere appropriate.

    IMPORTANT: You should not use Excel (or any other spreadsheet software) to open your csv files after creating them as this may reformat some fields (e.g. date) and cause a problem when attempting to upload the file to the pension provider.

    You should consult Royal London if you require further guidance on how to upload csv files.

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