Pension deductions don't match. Quickbooks payroll option is enabled. But the nest pension contribution does not match the quickbooks pension calculation. Why?

lisa41 · ‎July 03, 2019

The nest auto calculation has been ticked. The figures aren't matching. On a monthly salary of £719, quickbooks says the employee pension is £8.30, but NEST says £28.76. It's supposed to be 5%. Why is there a difference? How do I get the two to match?! Surely they should be the same??!! Where am I going wrong?

Phil · ‎July 21, 2019

NEST do not operate a 'Net Pay Arrangement' so the employee's contribution is paid after deduction of tax, and taken from their 'net (taxed) pay'

So the contribution is calculated as:-

Gross Pay x 5 % x (!- Basic rate of tax(20%)=4% of employees gross salary

So for a gross salary of £719 an employee payment of £28.76 would be correct

The 'missing 1% is reclaimed from HMRC by NEST

In Quick books you need to ensure that all earnings are included in the calculation of pension contributions, and set the contribution rate to 4% (not 5%) - and then say that this does not affect any of the taxes.

I am not sure how QB could arrive a contribution of £8.30 but suspect you have not included all the relevant earning.

EDIT

Excluding earnings below the lower earnings threshold would result in contributions of 4% (after tax) on approx £200 pounds of income = approx £8.30 / month.

So the problem relates to the application of the lower earning threshold, which is not mandatory - but must be consistent in NEST and QuickBooks

View solution in original post

Alessandra_B · ‎July 03, 2019

Hey @lisa41,

You can check the setup of your Nest Pension Contribution to know why they aren't matching. Let me discuss this further and help you from there.

Firstly, you’ll need to check the taxation method. For this, you can contact your pension provider. By doing this, you can make sure that you're using the correct taxation method.

Next, you can check the earning threshold for the pension. You may have reached the allotted amount for the pension. Which then causes the amounts to be different.

Lastly, you’ll need to make sure that the rates you’ve entered are correct, based on the rate mandated by your pension provider. This way, your amounts are in line with their calculation.

To check the rate you've entered, you can follow the steps below:

Click on Lists from the menu bar.
Choose Payroll Item List.
Double-click on the payroll item.

For further guidance, you can also refer to this article: Auto Enrollment for Workplace Pensions in QuickBooks Desktop.

Please let me know if you need help with anything else. I’d be happy to help.

Phil · ‎July 21, 2019