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Receiving contributions

Important

Early draft of the code of practice

This code is not in force yet. It is an early version for the new code of practice consultation.

To give us feedback on issues such as the design, usability and navigation of this code, email us at webfeedback@tpr.gov.uk.

You can also read more information about the consultation.

Published: 17 March 2021

Employee contributions are deducted from scheme members’ salaries. Unless the scheme rules or regulations set out a shorter period, those contributions must be paid to the scheme by the 19th day of the following month, or the 22nd day if paid electronically.RC1 There are special rules for the first deduction of contributions on automatic enrolment.RC2 Employer contribution payments must be paid by the date specified in the scheme rules, regulations or documentation.

Governing bodies are responsible for preparing and understanding the payment schedule, or direct payment arrangement, which details the contributions due to be paid. They must also put in place processes that facilitate the monitoring of contributions and transmission of payment information between the employer, member and scheme administrator.

Unless exempt,RC3 a governing body should ensure it has the following measures in place.

Maintaining and recording contributions

  • Manage the payment schedule (DC schemes), schedule of contributions (DB schemes), direct payment arrangements (personal pensions) or other scheme documentation.
  • Ensure contributions adhere to the rules of the scheme and any overriding legislation.
  • Maintain a record of employer and member contributions expected and received, due dates and any outgoings, for example benefits and expenses likely to be incurred in the coming scheme year.RC4
  • Prepare any schedule in consultation with the employer(s).
  • Be aware of the information employers must provide.RC5
  • Maintain a log of missed contributions and related recovery activities.

Operational and risk management

  • Have processes and systems in place to ensure the scheme can accept contributions from existing and, if necessary, new employers.
  • 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.
  • Be able to monitor, quickly identify and pursue missing contributions.
  • Apply a risk-based and proportionate approach identifying employers and situations that present a higher risk of materially significant payment failures.
  • Treat any failure to make payment of employee contributions as materially significant.
  • Safeguard all contributions once they are in the scheme.
  • Have processes to enable members to demonstrate compliance with HMRC tax requirements, ie annual allowance.

Reporting and remedial actions

  • Be able to check whether contributions and amounts due to the scheme have been paid on time.
  • Have processes in place to identify whether a payment failure is of material significance.
  • Fulfil their obligation to report material payment failures to us and members. See also Decision to report.
  • Seek to recover outstanding payments and debts owed to the scheme.
  • Reclaim any outstanding contributions from the employer assets in the event of an employer insolvency or claim on the redundancy payment service. Learn more in Resolving overdue contributions.
  • Have a process for rectifying the missing contributions, ensuring minimal financial detriment to the member.
  • Where necessary, keep records of any employer contribution due to the scheme that has been written off.RC6

Glossary and legal requirements

Contributions

Money 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

These are arrangements between the member and the employer under which contributions fall to be paid by the employer towards the scheme:

  1. on the employer’s own account (but in respect of the member), or
  2. on behalf of the member (if the member is making any contributions) out of deductions from the member’s pay.

Essentially, 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

Personal pension

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

RC1Section 49(8) Pensions Act 1995
[Article 49(8) Pensions (Northern Ireland) Order 1995]

RC2Regulation 16 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996
[Regulation 16 of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]

RC3The 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].

RC4Section 87(2) Pensions Act 1995, see also regulations 18 and 19 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996.
[Section 85(2) Pensions (Northern Ireland) Order 1995, see also regulations 18 and 19 of the Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]

RC5The Occupational Pension Schemes (Scheme Administration) Regulations 1996
[The Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]

RC6Regulation 5 of the Public Service Pensions (Record Keeping and Miscellaneous Amendments) Regulations 2014 and section 49 Pensions Act 1995
[Regulation 5 of the Public Service Pensions (Record Keeping and Miscellaneous Amendments) Regulations (Northern Ireland) 2014 and Article 49 Pensions (Northern Ireland) Order 1995]