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Refunding pension contributions
Refunding pension contributions
Rebecca Russell avatar
Written by Rebecca Russell
Updated over a week ago

This article details how to add an employee and/or employer pension refund. You'll usually need to refund pension contributions if an employee opts out within one month of being auto-enrolled. Otherwise, they might have left the scheme last month but you forgot to stop their pension contributions.

Note: You should only add a pension refund on advice from your pension provider. Otherwise they may not allow the pension refund if the contributions have been invested, resulting in the employer being out of pocket.

Refunds from a pension provider

A pension provider typically processes one refund, which is a total of all employee contributions before the employee opts out. The refund usually matches the amount paid into the pension. However, it might not match for the following reasons:

  • the pension provider might not take the first month's contribution from the employer's bank account, to speed up the refund process if the employee opts out.

  • the pension provider might not include the latest pension contribution if the pension upload file hasn't been processed yet.

If you don't agree with the values, please contact your pension provider.

Adding a pension refund on PayFit

1. Stop any further pension contributions

If your employee has opted out of the pension scheme, you'll need to remove them from the scheme to ensure no further contributions are deducted. To do this;

  1. From the employees' record, click the Employment tab.

  2. Under the Pension contributions section, click Edit.

  3. Find the relevant pension scheme and make a note of the tax treatment. E.g. net pay arrangement, salary sacrifice or relief at source.

  4. Toggle off the Include in pension option and enter the date the employee left the scheme.

  5. Click Save.

2. Identify how much to refund

You'll need to find out the values to refund to the employee. This might be just one month's pension contributions or the pension contributions paid to date.

If the employee has left the scheme, you'll usually only need to refund one month's contributions if you forgot to end their scheme last month. To check the values to refund for one month;

  1. From the left, choose Reports, then Payslip breakdowns.

  2. In the top-right-hand corner, select the relevant month.

  3. Find the relevant employee, then click Payslip breakdown.

  4. Click Pensions.

  5. Make a note of the employee contribution, and the employer contribution from the same pop-up.

  6. Click Close.

If the employee has opted out of the pension scheme, it's likely you'll need to refund all of the contributions that have been contributed within the tax year. You can easily check this value:

  1. From the employee's record, click the Payslip breakdown section.

  2. Under the <company name> contributions section, click Year-to-date amounts.

  3. Make a note of the employee Pensions value under the Employee pay section, and the employer Pensions value as these are the amounts to refund.

  4. Click Close.

3. Add the pension contribution refund

Now you're ready to add your refund:

  1. From the employee's record, click the Pay items tab.

  2. Under the Additional payments section, click Add a new payment.

  3. From the Payment type drop-down, select Pension refund.

  4. From the Type of pension scheme, select the tax treatment you noted in the Stop any further pension contributions section.

  5. In the Date field, enter a date in this month, do not backdate this payment.

  6. In the Employee refund and Employer refund, enter the amounts you noted in the Identify how much to refund section.

  7. Click Save.

The refund now appears on the employee's payslip.

FAQs

Will PayFit add pension refunds for me?

If PayFit uploads your pension files for you, we'll typically be notified that the pension upload has failed as they are no longer expecting a pension contribution for an employee who has opted out. In this case, we will adjust your pension upload file to remove the pension contribution for this employee, then apply the employee and employer pension refund in your next payroll.

However, to ensure the pension refund is processed in the correct month, you should routinely check your pension portal to identify if any employees should be opted out.

If PayFit doesn't have access to your pension account we won't be notified of any refunds.

Note: If PayFit manages your pension scheme and you believe an employee is due a refund and they have not received it, please get in touch.

Where can I see a summary of pension refunds?

The employee can view their pension refunds on their payslip. You can also view refunds on the Pension contribution reports:

  1. From the left, click Reports, then Company reports.

  2. In the top-right-hand corner, from the drop-down, select the relevant month.

  3. Under the Payroll reports section, click Pension Contributions.

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