Payroll for pension schemes

Produced by Tolley in association with

Employment Tax

Guidance

STOP PRESS: This guidance note may be affected by the changes to the taxation of pensions made by FA 2024, Sch 9 from 6 April 2024 onwards. The commentary below covers the rules that apply prior to that date. Before continuing your research, see the Abolition of the lifetime allowance guidance note.

Introduction

In general terms, running payroll for pension schemes is no different than running PAYE for employees. Pensions are treated as income for PAYE and so pensioners are issued with a tax code (see the PAYE notices of coding guidance note) and tax is deducted accordingly.

The major difference between a ‘pensioner payroll’ and an ‘employee payroll’ is that no NIC is due on pensions (this is on the assumption that the pension is being paid from a pension scheme registered with HMRC).

Deductions from pensions

Apart from NICs, other deductions, with one further exception, can be made from pension payments in

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Vince Ashall

Payroll Consultant & Trainer at VA Payroll Services

Involved in payroll for more years than I care to remember! Initially in the NHS, where i oversaw the development of the NHS's bespoke payroll system (SPS Standard Payroll System), and latterly in the private sector. Served for 13 years as a MNT for a private sector defined benefit pension scheme. Have had articles published in payroll publications and and provide updates for various publishers. Fellow of the CIPP and gained a MSc in Payroll & Business Management in 2002. Now a self employed payroll and pensions consultant

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