How to process a pension refund manually through Enter Payments

Sometimes you need to refund pension contributions manually. For example, if you process an opt-out request but didn't issue the refund at the time.

Pay the refund using a pay element that adds the refund in the same way the pension scheme deducted it. This is to ensure your employee pays the correct tax.

Follow this guide to:

• Check your pension scheme
• Create a pay element with the correct settings based on your pension scheme
• Pay the refund
• Update the employee's year to date values 

Check the employee's pension scheme settings

Your employee's pension scheme settings decide how you need to set up the pay element you use to refund the payments.

If you're not already certain whether your scheme is salary sacrifice, deduct before tax or deduct after tax, you need to check. Follow the steps below to check your scheme.

1. Select Company, then Pension Schemes.
2. Choose the pension scheme assigned to the relevant employee, then select Edit.
3. Select OK on the message that appears.
4. On the Details tab of the pension scheme, check whether the checkbox beside Salary Sacrifice is selected. If it is, skip ahead to step 7, if not, proceed to step 5.
5. Click the Employee tab of the pension scheme,
6. Under the Settings section, note whether the checkbox beside Deduct Before Tax is selected, or clear.
7. Use the pay element settings section below to check the settings to use on your pension refund pay element.

Pay element settings

Click the option below that matches how your pension scheme calculates.

If you don't already have a suitable pay element to process the pension refund, you need to set one up. Ensure you apply the correct pre or post-tax and NI settings to this payment as confirmed above.

For help with creating your pay element, follow the set up pre and post-tax and National Insurance (NI) pay elements article.

Process the refund

You're now ready to process the refund in Enter Payments.

1. Follow our assign payments to an employee article to assign your pension refund pay element to them.
2. Click Payroll then Change Process Date.
3. Enter the date for your pay run.
4. Select this employee on your employee list, and click Enter Payments.
5. Enter the refund amount on the pension refund pay element.
6. Enter any other payments for all employees and complete the pay run as normal.

You've now processed the pension contribution refund. Complete the section below to update pension year to date values.

Update pension year to date (YTD) values

After you process a pension refund, amend the year to date values for the pension scheme in the employee's record. This is necessary because since you refunded contributions, the existing year to date values aren't correct anymore.

You don't need to refund your Employer pension contribution in Enter Payments. To document the Employer refund in your payroll software, clear or lower the YTD values as applicable. 

 NOTE: Ensure you record the employer refund in your accounting software. 

The steps you need to follow depend on whether there's more than one pension scheme assigned in their employee record. 

If it's the employee's only pension scheme:

1. Double-click the relevant employee on your employee list, then click the Employment tab.
2. Select YTD Values, then Other YTD.
3. Under the Pension heading, amend the values in the pension boxes beneath as below:
   • If you refunded all pension contributions, clear the YTD values
   • If you refunded part of their contributions, reduce the value by the amount you refunded
      NOTE: Don't clear any values under the Other heading, as they don't relate to pensions. 
4. Select Save, then Close.

If the employee has multiple pension schemes assigned:

1. Select Employee.
2. Double-click the relevant employee on your employee list, then click the Employment tab.
3. Select YTD Values, then Pension.
4. Amend the values for the relevant pension scheme as below:
   • If you refunded all pension contributions, clear the YTD values
   • If you refunded part of their contributions, reduce the value by the amount you refunded
5. Select OK, then Save.
6. Select Close.

You've now processed the refund and the year to date values no longer appear on any payslips or reports.