Issue: 10 Date: February 2016 Pensions In Practice · forthcoming tax year, 2016/2017. Employers...

Pensions In Practice (PIPS) “Your monthly review of NHS Pensions from Fairway Training”

Issue: 10 Date: February 2016

Fairway Training Ltd Specialists in NHS Pensions & Payroll

Administration and Training

www.fairwaytraining.com

Please note that this is only an

estimate of overall levels of

contributions payable and does not

affect an employee’s pension

benefits.

Once the statement has been

completed, it should be saved

specifically as ‘Your GPCode and

2016-2017 Compliance Assurance

and Estimated Total Contributions

Statement’. It must be authorised by

the most senior accountable officer

in your organisation, who should

return it to NHS Pensions by email to

the following email address:

nhsbsa.pensionscompliancestateme

[email protected] no later than 2nd March

2016.

In the December 2015 Employers Newsletter,

NHS Pensions announced that the 2016-17

NHS Pension Scheme Compliance Assurance

and Contributions statement was due for

completion. This was introduced for the first

time to GP Practices last year and, as a

reminder, it is a mandatory requirement

under the Public Service Pensions Act 2013.

This statement seeks assurance from those

with board accountability that organisations

are aware of their responsibilities and will

ensure that all requirements are met.

The statement can be downloaded from the

NHS Pensions website or by clicking the link

here.

It is important to note that the figures being

requested are only estimated figures. We

therefore recommend that January 2016

pension contributions are used as the basis for

estimating the total amount due for

2016/2017. However, there may be variations

that you could consider such as:

If you intend to give an increase in pay in 2016/2017, increase the totals by the appropriate percentage.

If you are aware of any significant staffing changes you may want to incorporate these.

If there are no variations to take into account,

simply enter the January 2016 contributions

(which should be your latest figures entered

on the GP1) against each month as shown in

the adjacent table.

This is a statutory requirement.

Please note that Fairway Training

will therefore not be able to

complete the statement on your

behalf.

NHS Pensions suggest that you

use the read receipt function to

confirm that your statement has

been received.

Compliance Assurance

The State Pension is Changing

January Newsletter

mailto:[email protected]


http://www.nhsbsa.nhs.uk/Pensions/5280.aspx

http://www.fairwaytraining.com/downloads/FTB/201617_Compliance_Assurance_V1.xls




In the good old days women could retire at 60 and men

at 65; the state provided a pension accordingly and

everyone was happy!

On 6th April 2002 there was a small revision to SERPS and

it was rebranded as the State Second Pension (S2P).

There were differences between SERPS and S2P but

essentially it was the same product in that it was still a

top up of the Basic State Pension.

During this period of time NHS employees were broadly

divided into two types of NI Category:

Full Standard Rate NI Letter A

Full Rate (COSR) NI Letter D

Since last April there has also been the introduction of

reduced employer rates for under 21s which saw the

launch of NI letters M and I respectively.

So what is changing?

In order to simplify things, on 6th April 2016 the

Government is introducing a new State Pension to

replace the Basic State Pension and S2P. Therefore, if you

reach SPA on or after 6th April 2016 you will receive the

new State Pension, currently proposed at £155.65 per

week. This is the full unreduced amount. However,

please note that a reduction will be made for any period

of time that you were contracted out of either SERPS or

S2P.

In order to receive the maximum allowable State Pension

you must have paid NIC at full rate for 35 years. To

qualify for any State Pension you must have paid NIC for

at least 10 years. Inevitably there are detailed rules

underneath this very general statement but it is not our

intention in this newsletter to explain fully the new State

Pension. You can access much more detailed information

via the government website or request an estimate by

clicking here.

Over the last few years the State Pension Age (SPA) has

been steadily increasing and the current SPA is 68 if you

were born on or after 6th April 1978.

This was also the date when the State Earnings Relating

Pension Scheme, or SERPS as it was more commonly

known, was introduced. From this date onwards there

would be two components of the State Pension. There

was the Basic State Pension and there was SERPS. At a

very basic level, SERPS ‘topped up’ the Basic State

Pension.

At that time, it was deemed that employees who were

members of a defined benefit occupational pension

scheme, such as the NHS Pension Scheme, did not need

to belong to SERPS because they were making their

own provision for a pension in addition to the Basic

State Pension. SERPS was generally therefore aimed at

employees who had no additional pension provision

and who would be relying solely upon a pension from

the Government.

NHS Pension Scheme members, who did not need to

participate in the new SERPS arrangements, were

automatically classed as contracted out of SERPS. As a

consequence, employees and employers paid lower

rates of National Insurance Contributions (NIC). Pension

schemes that offered defined benefits such as final

salary related benefits were categorised as ‘Contracted

Out Salary Related’ or COSR Schemes.

https://www.gov.uk/state-pension-statement

https://www.gov.uk/new-state-pension/overview

https://www.gov.uk/state-pension-statement




So why is this so important?

In essence it is quite simple really. D rate NIC (contracted

out) is being removed and all employees and employers will

pay A rate - the full standard rate - with effect from the

beginning of the 2016/2017 tax year. The table below

shows a comparison between the two rates for the

forthcoming tax year, 2016/2017.

In summary therefore we can confirm that the employer’s

share of NIC will rise by 3.4% on earnings between £486.01

and £3337.00 per month. Employees will also pay 1.4%

additional NIC on earnings between £486.01 and £3337.00.

small decrease in tax. This will go some way towards

compensating for the rise in NI contributions and they can

also be comforted by the fact that they are now paying

towards the new higher Basic State Pension. For the

employer however, it’s simply a case of an increase in

employers costs!

Detailed below are three examples showing the difference

the change of NI category will make for both the employee

and the employer. Hopefully this will be useful for budget

purposes.

Employees will of course

enjoy the Chancellor’s

increase in personal tax

allowance for 2016/2017

which will result in a

Example A

Gross Pay (Monthly) £1000.00

Employees NI A £39.36

Employees NI D £32.16

Additional EEs NIC £7.20 per month

Employers NIC A £44.71

Employers NIC D £27.24

Additional ERs NIC £17.47 per month

Example B








Example C











Payroll Action

With effect from April 2016 it is important that you amend

your payroll software to ensure that employees are paying

the correct rate of NIC. The changes are as follows:

So that they can make the decision if they would like to put their money inside our pension pot.I shall call you back on Monday.

Yours faithfully (Obah) Ugwunwa Ajike

Kate Ajike Corporations Pension Service Po box 254, 275 New North Road London N1 7AA 02030920328

In our opinion anyone who manages to shuffle the National Health Service initialism to NSH fails at the first hurdle!

4. Updating a member’s record on POL where an Additional Pension contract (instalments) is present

There aren’t many members who are making Additional Pension (AP) contributions but where this is the case it is important to ensure that records are updated correctly via Pension Online (POL). This could be when an employee leaves or at year end. A problem occurs when incorrect values are entered which causes the member to receive a ‘revalued Additional Pension’ amount when the contract is ended.

There are three elements to be updated. These are:

Identifier (this should be prepopulated with the appropriate election ID).

Contributions (this should be the total amount for the period being updated).

Instalments (this should be the total number of months the member paid for, in relation to the period being updated).

The following error message can appear when trying to update a member’s record on POL:

‘**Additional Pension Contract not recognised for the year YYYY, if you believe this is incorrect then please contact NHS Pensions.

If you receive the above error message when updating a member’s record please contact our AP team. The member may have a valid AP contract but there may be a corruption on the member’s record meaning our system does not recognise that there is a valid AP contract that requires updating. Our AP team will then advise whether

It would be worthwhile checking with your payroll provider

to ensure they are aware of these changes. Likewise if you

run your payroll ‘in house’ please ensure your payroll

software is amended accordingly. We can confirm that if

you are a payroll client of Fairway Training, these

amendments will automatically be made.

There are a number of items which affect GP Practices and

we have commented further below. The numbering

reflects the number of the article within the original

newsletter.

2. Email Awareness

Every now and again bogus emails try to dupe

unsuspecting individuals into handing over personal

information to scammers. Such an email has been

circulating recently and NHS Pensions, quite rightly, have

moved quickly to refute any links with the alleged

organisation and to deny any involvement. The text of the

scam email is shown below:

I am the founder of Kate Ajike Corporations Pension Service. I have spoken with NHS pension department and they accepted for all NSH staff to be given the opportunity to select and make the decision to begin to put their money inside Kate Ajike Corporations pension service I understand that those who has worked for NHS previously will benefit from Kate Ajike Corporations Pension Serivce because they are not entitled to rejoin the actual NHS pension. Attached is the application form to give to all your staff old and new.




the changes to the tax legislation from April 2016. The paper version will be updated shortly.

10. Updated documents

The only document of significance that has been updated was a slightly revised version of the SD502.

13. Did you know…? Infographic

they have resolved the issue and the record can be updated, or if the AP contract has in fact ended, due to a 12 month break in service or by the member’s own decision, and the contributions should be refunded by the employer’.

The email address for the Additional Pension team is: [email protected].

5. Total Pensionable Pay (TPP)/Notional Whole Time (NWT) update

This concerns the ongoing saga of how to calculate Notional Whole Time pay for part time staff!

We commented on this in our last edition of PIPS and NHS Pensions have, as promised, released more information. There are a couple of examples shown in the newsletter but it is fair to say that they have received many queries about this and still do not seem to be absolutely sure. They commented; “The response we received regarding this article has shown that there is an inconsistent approach on how supplementary payments are treated when calculating a notional whole time total pensionable pay. This is against regulation R5(4) of the 1995 Regulations and similar 2008 provisions and is unfair to whole time workers doing the same role.”

They have accepted that there needs to be an implementation date with detailed documentation available. In our opinion this is one of the most fundamental changes to the Scheme and it has certainly ‘ruffled a few feathers’ for those who have been administering NHS pensions for many years. NHS Pensions have confirmed; “Therefore, continue to use your current method of calculating notional whole time pay for part time members with whole time supplementary payments.”

6. 2016-17 NHS Pension Scheme compliance statement and contributions estimate

Covered in our main article on page 1.

9. Change to AW8 on POL

NHS Pensions have confirmed that the online version of the AW8 on POL has recently been updated to reflect

Editorial Team:

Andrew Shirley

Daniel Bott

Stephen Blake

http://www.nhsbsa.nhs.uk/Pensions/4115.aspx


Issue: 10 Date: February 2016 Pensions In Practice · forthcoming tax year, 2016/2017. Employers...

Documents

Transcript of Issue: 10 Date: February 2016 Pensions In Practice · forthcoming tax year, 2016/2017. Employers...