1. An Insight of Pensions in UK

2. Pensions in the United Kingdom fall into seven major divisions;
Basic State Pension, State Second Pension (S2P), Occupational
Pensions, Stakeholder Pensions, Group Personal Pensions and
Personal or Individual Pensions. Personal accounts, automatic
enrolment and the minimum employer contribution will be new
policies joining these from 2012.

3. State Pensions
 The Basic State Pension (formerly, and often still known as Retirement Pension), is one part of the
United Kingdom’s Government pension arrangement, alongside Graduate Retirement Benefit and
State Earnings-Related Pension scheme (now State Second Pension).
 The State Pension is a "contribution based" benefit, and depends on an individual's National
Insurance (NI) contribution history. For someone with the full number of qualifying years (years
in which NI contributions were paid) which is 30 years, it is payable at a flat rate of £97.65 per
week (2010/11). The table shows how the basic state pension for singles and married couples
Married CPI adjusted CPI adjusted
Year Single person
couple single couple
2009-10 £95.25 £152.30 £95.25 £152.30
2010-11 £97.65 £156.15 £97.65 £156.15

4. Occupational Pensions
Occupational pension schemes are arrangements established by employers to provide pension and
related benefits for their employees. Categorization of pension schemes based on retirement
benefits:
 Defined Benefit / Final Salary Schemes (DB / FSS): In such an arrangement, the employee was
promised a fixed level of pension based on their final salary to which he or she would become
entitled on retirement. The amounts payable are restricted by taxation rules.
 Defined Contribution /Money Purchase Schemes (DC / MPS): Over recent years, many
employers have closed their defined benefit schemes to new members, and established defined
contribution or money purchase arrangements. In this arrangement, the occupational pension
pays into a fund, and the fund is used to buy a pension (typically an annuity) when the individual
retires. The pension is therefore determined by the value of the fund and the health of the annuity
when the individual retires, as opposed to their salary.
 Funding: UK occupational pension schemes are typically jointly funded by the employer and the
employees. These are called "contributory pension schemes" when the employee contributes
typically something in the region of 6% of salary, tax free and "Non contributory pension
schemes" where the employer funds the scheme with no contribution from the individual.

5. Individual or Personal Pensions
 A Personal Pension Scheme (PPS), sometimes called a Personal Pension Plan (PPP), is a UK tax-
privileged individual investment vehicle, with the primary purpose of building a capital sum to
provide retirement benefits, although it may also be used to provide death benefits.
 Contributions to a PPS can be made either from the individual or from an employer. An individual
can, each year, put in an amount up to the lower of 100% of their earned income or the prevailing
annual allowance which means the maximum one can invest each year is 100% of your taxable
earnings or £255,000 (in 2010/11), whichever is lower.
 An employer can contribute an amount of up to the annual allowance each year, provided that
they can demonstrate to the local inspector of taxes that this contribution has been made wholly
and exclusively for the purposes of the business. This definition is open to wide interpretation and
HMRC have yet to provide any more concrete guidelines.

6. Stakeholder Pension Scheme
 Stakeholder pension schemes were introduced in the UK on the 6th April in 2001 to encourage
more long-term saving for retirement, particularly among those on low to moderate earnings. They
are required to meet a number of conditions set out in legislation, including a cap on charges, low
minimum contributions, and flexibility in relation to stopping and starting contributions.
Employers with five or more employees are required to provide access to a stakeholder pension
scheme for their employees unless they offer a suitable alternative pension scheme. The features of
stakeholder pensions were intended to make them cheaper to sell than existing personal pensions
and to provide a more transparent and attractive saving vehicle.
Conditions:
 All stakeholder pension schemes must be registered with The Pensions Regulator.
 Like Personal pension schemes, stakeholder pensions must provide an income in retirement using
a minimum of 75 % of the fund. Up to 25 % of the fund can be taken as a tax free lump sum.
 Originally the maximum annual charge was 1.0 % of the fund value each year. Since 2005 this has
increased to 1.5 % of the fund value for each year until the 10th year and 1 % thereafter.
 There can be no penalty on exit or entrance to the scheme, and the minimum contribution is £20
per month. However, payments can be stopped at any time and a single contribution of £20 is
enough to open a plan.

7. Group Personal Pensions
 Group personal pensions are another pension arrangement which are linked to an employer. A
group personal pension plan (GPPP) can be established by an employer as a way of providing all
of its employees with access to a pension plan run by a single provider. By grouping all the
employees together in this way, it is normally possible for the employer to negotiate favorable
terms with the provider, thus reducing the cost of pension provision to the employees. The
employer will also normally contribute to the GPPP.

8. Pensions (Snippets)
 Contracting-out certificate
For organization to qualify for payment of reduced NICs, requires a contracting-out certificate
from the Inland Revenue. The SCON and ECON numbers received needs to be entered into the
system and specified on your end-of-year returns.
 Contracted-out NICs
The system distinguishes employees for NI purposes according to whether or not they have
contracted to pay into a pension scheme which has contracted-out of SERPS. An employee who
has joined such a scheme also contracts out of SERPS and pays contracted-out NICs. An
employee who decides against joining the contracted-out pension scheme does not contract out of
SERPS, and therefore pays not-contracted-out NICs.
 Tax relief
Tax relief is given on an employee’s pension contributions.
 Additional voluntary contributions
An employee can make additional voluntary contributions (AVCs) to the company pension
scheme. He or she can also make free-standing additional voluntary contributions (FSAVCs) to a
separate individual scheme run by an insurance company, to take advantage of tax incentives. An
employee's overall pension contributions when added to any AVCs or FSAVCs must not exceed
15% of the employee's total remuneration. The pensions component checks that employees do
not exceed this statutory pension contribution threshold

9. Pension Funds GB (Infotype 0071)
Definition
This info type stores an employee’s own pension contributions, his or her employer’s
contributions, as well as any additional pension contributions an employee may choose to make.
 All information for calculating contributions to be paid into employees’ pension schemes is stored
in Pension Funds GB records. When employees opt to join schemes available in the company, we
need to create the appropriate records for them, which are valid from the date on which they have
chosen to join.
 During their employment, employees’ pension situations may change. Therefore it needs to be
created new records to reflect each of these changes.

10. Categorization on the basis of Contribution Type
In order to display or edit a Pension Funds GB record, first enter a pension subtype. This is the
type of scheme that the employee contributes to, which may be a flat-rate, percentage, or a mixed-
value pension scheme.
 Flat-Rate Contributions
If the employee contributes to a flat-rate scheme, We must maintain both the flat-rate
contributions for the employee and the employer in this info type.
 Percentage-Rate Contributions
If the employee contributes to a percentage scheme, you must maintain both the percentage
contributions for the employee and the employer in this info type.
 Mixed-Value Contributions
When an employee in the company has opted for a mixed-value pension scheme, and contributes
varying percentages or amounts from his of her salary, we must enter the respective contribution
to be made, per band. These are the agreed amounts from the lower, middle and upper bands of
the employee's monthly gross salary which he or she will pay into the pension scheme. We must
also maintain the employer’s mixed-value contributions in the same way.

11. Infotype 0071

12. Infotype 0071

13. Percentage Contributions
The figures in the Reference fields under Employee and Employer in the Percentage contributions group box
appear as defaults and are the standard employee and employer contributions agreed within your
company. If an employee has a different arrangement, you should enter the relevant figures in the
Actual fields of this group box. These amounts will be paid into the employee's pension scheme.
Band levels
 The low and high band levels divide an employee's monthly gross salary into three bands - lower,
middle, and upper (if need be). This utility is used when different percentages are applied to
different salary levels.

14. Pensionable Pay Bands
The percentage values specified for the lower, middle, and upper bands are used by the payroll to
calculate the amount to be deducted from the employee's monthly gross salary and paid into the
pension scheme:
If an employee earns up to the Low actual figure, the payroll deducts the Lower band
percentage contribution from the salary.
Example 1
The low band level has been defined as £500.00.
The lower band percentage contribution has been defined as 5%.
An employee earns a monthly gross salary of £450.
The employee's monthly contribution into the pension scheme would be £22.50.
(450 x 0.05) = 22.50

15. Pensionable Pay Bands
If an employee earns between the Low and High actual figures, the payroll deducts the
lower band percentage contribution from the lower band of the salary and the middle band
percentage contribution from the middle band of the salary.
Example 2
 The low band level has been defined as £500.00.
 The high band level has been defined as £750.00.
 The lower band percentage contribution has been defined as 5%.
 The middle band percentage contribution has been defined as 10%.
 An employee earns a monthly gross salary of £600.00.
 The employee's monthly contribution into the pension scheme would be £35.00.
(500 x 0.05) + (100 x 0.1) = 35.00

16. Pensionable Pay Bands
If an employee earns more than the High actual figure, the lower band percentage contributions are
deducted from the lower band of the salary, the middle band percentage contributions from the
middle band of the salary, and the upper band percentage contributions from the upper band of the
salary.
Example 3
 The low band level has been defined as £500.00.
 The high band level has been defined as £750.00.
 The lower band percentage contribution has been defined as 5%.
 The middle band percentage contribution has been defined as 10%.
 The upper band percentage contribution has been defined as 5%.
 An employee earns a monthly gross salary of £1000.
 The employee's monthly contribution into the pension scheme would be £62.50.
(500 x 0.05) + (250 x 0.1) + (250 x 0.05) = 62.50

17. Additional Voluntary Contribution
 Flat-Rate Additional Voluntary Contributions.
We can also record any additional voluntary contributions (AVCs) which will be paid by the
employee into a pension scheme. Such flat-rate AVCs may be made on a regular or ad hoc basis,
irrespective of the type of pension scheme the employee pays into.
 Percentage Additional Voluntary Contributions.
We can also maintain any additional percentage voluntary contributions paid by the employee into
his or her pension scheme. Such percentage AVCs may also be made on a regular or ad hoc basis,
irrespective of the type of pension scheme the employee pays into.
 Free Standing Additional Voluntary Contributions.
Free Standing Additional Voluntary Contributions (FSAVCs) are pension contributions which the
employee can make to a personal pension provider, from his or her salary. An employee may make
contributions to only one such scheme in a given tax year. Only employees who are also members
of an occupational pension scheme may contribute to a FSAVC scheme.

18. /111 – Pensionable pay Wagetype
 Wage types which are to be included in pensionable pay are cumulated in
the secondary wage type /111. The wage type helps to determine the
amount to be paid to the employee.
 In order for a wage type to be included in the pensionable pay, there
must be an check for the cumulation class 11.

19. GPENS Payroll Function
The function is necessary when calculating the pension fund contributions to be paid by both
employee and employer in a particular pay period. The processing may be for multiple pension funds.
Procedure
The function makes use of the Pension Funds (0071) info type data as well as the GB-Pens table
and gross payroll data. This function is processed in the schema G000.

20. Year End Adjustment Wage types
 In the standard SAP solution for UK payroll, there are adjustment wage types commonly known
as the ‘E’ (Augmentation) Wage types. Each statutory wage type has a corresponding E wage type,
for example /101 (Total Gross) has the corresponding wage type E101 (total gross adjustment). E
wage types enable you to adjust statutory cumulative totals (yearly) that will be reported on at end
of year. They are processed by the personnel calculation rule GEOY.
 When E wage types are used, the RESULTS table as well as the CUMULATIVE RESULTS table
are affected
 There are two reasons for this:
1.This allows correct auditing of the results
2. In the payroll driver, the CRT is only ever filled from the RT with the function ADDCU, so the
value has to be on the RT to feed the CRT.
 The personnel calculation rule GEOY is situated at the end of the subschema GNTO, so that only
wage types already in the RT are affected. This means that use of adjustment wage types can only
directly affect the corresponding technical wage type and not indirectly any other wage types.

21. Tables for Pensions
T5G30 Pension Schemes
T5G31 Pension Contribution Calculation Rules
T5G32 Pension Holidays
T5G33 Pension Contribution Calculation Rule Bands
T5G34 Pension Contribution Calculation Rule - Flat Rates
T5G35 Pension Contribution Calculation Rule -
Percentages
T5G36 Pension Contribution Calculation Rule - Mix
T5G37 Pension Scheme Types
T5G3T Pension Scheme Names

22. Reports
RPCPENG0_NEW
 The Pension Results Report (RPCPENG0_NEW) produces a list of pension contributions for
relevant employees, broken down by payroll area and pension scheme. We will generally run this
report for third-party pension providers. This will enable us to check the amounts sent to the
pension providers and produce a list of employees who are members of the scheme.
Excess Pension Contribution – Simplification (RPCPENEOYG0)
 This report generates the list of employees who have excess contribution towards pension over
either of the following:
1. Total taxable pay
2. Annual allowance
Pension Contributions Report (RPCPENCONG0)
 This report displays the cumulated contributions of the employer and the employee towards
various pension schemes in a particular tax year.