NOTE: On 6 April 2012 contracting out of the additional State Pension on a defined contribution basis was abolished, which means you can no longer use a COMP occupational pension and NI categories F, G and S are no longer valid.

NOTE: It's no longer possible for employees to join COSR schemes, or to make contributions if they're an existing member. 

COSR stands for Contracted Out Salary Related.

Being contracted out means opting out of the State Second Pension, previously known as SERPS.

Employees contributing to COSR schemes receive NI relief as they're assigned NI categories D, E, or L, resulting in reduced NI contributions. The pension contribution is also deducted before tax is calculated.

Tip: If the employee is over state pension age and normally in Category C, you should set up a new pension scheme with the same settings but type: Other.

NOTE: It's no longer possible for employees to join CISR schemes, or to make contributions if they're an existing member.

CISR stands for Contracted In Salary Related.

The pension contribution is deducted before tax is calculated. Employees contributing to CISR schemes have NI categories A, B, C, J or X.

NOTE: It's no longer possible for employees to join COMB schemes, or to make contributions if they're an existing member.

COMB stands for Contracted Out Mixed Benefit.

The pension contribution is deducted before tax, unless the scheme is marked as stakeholder friendly. Employees contributing to COMB schemes have NI categories D, E, or L.

Tip: If the employee is over state pension age, they should be assigned category C.

GPP stands for Group Personal Pension.

This scheme type isn't contracted out, so NI contributions are at the standard rate, with employees having NI categories A, B, C, J or X. The pension contribution is ultimately tax free, but the employee must pay tax at source which the pension provider can reclaim from the government and add to the employee's pension fund.

Tip: If the scheme is percentage based, the calculation includes the relevant amount of tax relief, currently 20%. For example, if an employee's monthly gross pay is £1000 and their pension contribution is 10%, the pension contribution is £80 calculated as follows:

10% of £1000 = £100
20% of £100 = £20
£100 - £20 = £80

PPP stands for Personal Pension Plan.

This scheme type isn't contracted out, so NI contributions are at the standard rate, with employees having NI categories A, B, C, J or X. The pension contribution is ultimately tax free, but the employee must pay tax at source which the pension provider can reclaim from the government and add to the employee’s pension fund.

Tip: If the scheme is percentage based, the calculation includes the relevant amount of tax relief, currently 20%. For example, if an employee's monthly gross pay is £1000 and their pension contribution is 10%, the pension contribution is £80 calculated as follows:

10% of £1000 = £100
20% of £100 = £20
£100 - £20 = £80

A stakeholder pension is one of the more basic and flexible pension schemes. Before 1 October 2012, employers with five or more employees may have had to make a stakeholder pension scheme available to their employees within three months of them being affected by stakeholder requirements. However, some employers were exempt. Since the introduction of automatic enrolment legislation, it's no longer a statutory requirement. For more information, please visit https://www.thepensionsregulator.gov.uk/en/employers/managing-a-scheme/stakeholder-pensions

The pension contribution is ultimately tax free, but the employee must pay tax, which the pension provider then reclaims from the government and adds to the employee's pension fund. Employees contributing to stakeholder schemes can have NI categories A, B, C or J. For further information, please visit www.gov.uk/personal-pensions-your-rights/stakeholder-pensions

Tip: If the scheme is percentage based, the calculation includes the relevant amount of tax relief, currently 20%. For example, if an employee's monthly gross pay is £1000 and their pension contribution is 10%, the pension contribution is £80 calculated as follows:

10% of £1000 = £100
20% of £100 = £20
£100 - £20 = £80

You can use an Other type of pension scheme to set up any scheme which doesn't fit the common scheme types already available in Sage 50 Payroll. You can edit all the properties of a pension scheme, such as whether contributions are to be deducted before tax and whether the minimum rebate should be calculated.

Tip: If the scheme is percentage based and in the Employee tab within the pension scheme the Deduct Before Tax check box is clear, the calculation includes the relevant amount of tax relief, currently 20%. For example, if an employee's monthly gross pay is £1000 and their pension contribution is 10%, the pension contribution is £80 calculated as follows:

10% of £1000 = £100
20% of £100 = £20
£100 - £20.00 = £80

Also known as a multi-employer pension scheme, this type of pension scheme is available to many unrelated employers and their employees and is often used in automatic enrolment schemes. A Master Trust scheme normally deducts after tax, providing employees a saving on the tax they pay on their earnings. However, you can change this if necessary.

When you set a pension scheme as Master Trust and tick Use Qualifying Earnings for pensionable pay in the pension scheme settings of your software, the settings in the Employee and Employer tabs will automatically select the boxes for all statutory payments to be included in the pension calculation. The statutory payments boxes in the Employee and Employer tabs are only available to manually select or deselect when Use Qualifying Earnings for pensionable pay is not selected.

When setting up your pension scheme in Sage 50 Payroll, please contact your pension provider if you are not certain of any settings to apply.

Either:

• Specify an amount here to apply to all employees assigned to this scheme, as you can't amend it within each individual employee's record or in Enter Payments.
• Leave the amount as zero. You can then manually enter a contribution in Enter Payments each time you process the payroll.

Either:

• Specify a value here and, where necessary, amend the percentage within each individual employee's record.
• Leave the value as zero. You can then enter the required percentage within each individual employee's record.

Either:

• Specify an amount here and, where necessary, amend the amount within each individual employee's record.
• Leave the amount as zero. You can then manually enter a contribution in Enter Payments each time you process the payroll.

To calculate the pension percentage on your employee's total pensionable pay, select this option.

To apply the pension percentage to the NI earnings bands only, select this option.

To apply the pension percentage to your own defined earnings limits, select this option. Enter your earnings limits in the Lower and Upper boxes, which appear automatically when you select this option.

Note: The bands you enter apply to all employees on this pension scheme, regardless of their payment frequency. If you select this option and have employees of different payment frequencies on the scheme, you may need to set up multiple schemes.

Any

D, E, L

A, B, C, J, X

D, E, L

D, E, L

A, B, C, J, X

A, B, C, J, X

A, B, C, J, X

Y

N

N

Y

Y

N

N

N

Include Rebate and Amount

Y

N

N

N

N

N

N

N

Include SSP Payments**

Y

Y

Y

Y

Y

Y

Y

Y

Include SMP Payments**

Y

Y

Y

Y

Y

Y

Y

Y

Include SAP Payments**

Y

Y

Y

Y

Y

Y

Y

Y

Include SPP Payments**

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

N

N

N

N

ECON Needed

N

Y

N

Y

Y

N

N

N

SCON Needed

N

Y

N

Y

Y

N

N

N

AVC Allowed***

Y

Y

Y

Y

Y

N

N

N

**

In pensions 1-10 these options are selected as default, however they're clear in new schemes set up.

***

If fixed amount scheme contribution, must be greater than zero at company level.

shf

Stakeholder Friendly

Y

Box enabled and selected

N

Box enabled and clear

Y

Box greyed out and selected

N

Box greyed out and clear