Receiving contributions

General code in force: 28 March 2024

This module forms part of our expectations for trustees of those schemes required to operate an effective system of governance, see Systems of governance.

1. Employee contributions are deducted from scheme members’ pay. Unless the scheme rules or regulations set out a shorter period, those contributions must be paid to the scheme by day 19 of the following month, or day 22 if paid electronically¹. There are special rules for the first deduction of contributions². Employer contribution payments must be paid by the date specified in the scheme rules, regulations, or documentation.
2. Governing bodies are responsible for preparing and understanding the payment schedule, schedule of contributions, or direct payment arrangement³, which details the contributions due to be paid. They must also put in place processes to monitor contributions and the transmission of payment information between the employer, member, and scheme administrator.
3. Unless exempt⁴, a governing body should ensure it has in place the measures set out in paragraphs 5 and 6.
4. Governing bodies of public service pension schemes that are exempt should develop a record to monitor contribution payments to the scheme (a contributions monitoring record). This should comply with scheme regulations where relevant. Governing bodies should prepare the record for monitoring contributions in consultation with scheme employers.
5. In relation to maintaining and recording contributions, governing bodies should:
   1. Manage the scheme documentation relating to contributions, including the payment schedule for defined contribution (DC) schemes, the schedule of contributions for defined benefit (DB) schemes, and any direct payment arrangements for personal pensions.
   2. Ensure contributions comply with the scheme rules and any overriding legislation.
   3. Prepare any schedule in consultation with the employer(s).
   4. Be aware of the information employers must provide⁵.
   5. Maintain records of missed contributions and related recovery activities.
6. In relation to operational and risk management relating to contributions governing bodies should:
   1. Have processes and systems in place to ensure the scheme can accept contributions from existing and, if necessary, new or former employers.
   2. Be confident that other parties, including employers, third party payroll, administration systems, investment managers, and investment platform providers, have the capacity to transfer data and monies efficiently.
   3. Be able to monitor, quickly identify, and pursue missing contributions (see monitoring contributions).
   4. Apply a risk-based and proportionate approach to identify employers and situations that present a higher risk of materially significant payment failures.
   5. Safeguard all contributions once they are in the scheme.
   6. Have processes to enable members, whose benefits are held in the scheme, to show they’ve complied with HMRC tax requirements, for example annual allowance and money purchase annual allowance.

Glossary

Contributions

Money due to be paid into the scheme. This may come from members in the form of regular or additional contributions or from employers as regular or deficit- related contributions.

Direct payment arrangements

• Are arrangements between the member and the employer under which contributions fall to be paid by or on behalf of the employer towards the scheme:
  • on the employer’s own account (but in respect of the member), or
  • on behalf of the member (if the member is making any contributions) out of deductions from the member’s pay.
• Direct payment arrangements exist where: the employer arranges to make employer contributions to a personal pension scheme (under the arrangements), and/or the employer arranges to deduct the member’s contributions from pay and to pay them across to the pension scheme for the member.

Payment schedule

A schedule showing: (a) the contribution rates payable towards the scheme, by or on behalf of the employer and the active members of the scheme (b) such other amounts payable towards the scheme as may be prescribed, and (c) the dates on or before the payments of such contributions or other amounts are to be made.

Personal pension

A UK tax-efficient individual investment arrangement, with the primary purpose of building a capital sum to provide retirement benefits.

Schedule of contributions

A statement showing: (a) the contribution rates payable towards the scheme by or on behalf of the employer and the active members of the scheme, and (b) the dates on or before the contributions are to be paid.

Legal references

¹ Section 49(8) of the Pensions Act 1995 and regulations 16(2) and 21 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996. [Article 49(8) Pensions (Northern Ireland) Order 1995 and regulations 16(2) and 21 of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]’

² Regulation 16 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 [Regulation 16 of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997

³ Section 87 of the Pensions Act 1995 [Article 87 of the Pensions (Northern Ireland) Order 1995]

⁴ The exemption from the requirement to secure a schedule of contributions in respect of DB schemes under section 227 of the Pensions Act 2004 is in regulation 17 of the Occupational Pension Schemes (Scheme Funding) Regulations 2005. [The exemption from the requirement to secure a schedule of contributions in respect of DB schemes under Article 206 of the Pensions (Northern Ireland) 2005 is in regulation 17 of the Occupational Pension Schemes (Scheme Funding) Regulations (Northern Ireland) 2005]

The exemption from the requirement to secure a payment schedule in respect of DC schemes under section 87 of the Pensions Act 1995 is in regulation 17 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996. [The exemption from the requirement to secure a payment schedule in respect of DC schemes under Article 87 of the Pensions (Northern Ireland) Order 1995 is in regulation 17 of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997].

⁵ Regulation 6 The Occupational Pension Schemes (Scheme Administration) Regulations 1996 [Regulation 6 The Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]

Related content

• Contributions for DB schemes
• Maintaining contributions for DC schemes
• Administration: detailed guidance