When Earned (WE) Contribution Tier Calculation Method
In accordance with Teachers’ Pension rules, the ‘When Earned’ method must be used for the following types of calculations:
In accordance with Teachers’ Pension rules, the ‘When Earned’ method must be used for the following types of calculations:
- Contribution deduction from a payment to a member in the pay month after the one in which the member left employment.
- Refund of contributions due to overpaid salary or a retrospective opt-out.
There are other scenarios where the 'When Earned' method is recommended.
TPS When Earned Details Element
In accordance with TPS rules, the retrospective reporting of a mid-period change (that would ordinarily require split rows), requires that you report all split rows in the period, not just those that are impacted by the change. For example:
- A backdated reduction in full-time (FT) to part-time working hours (PTR) that takes effect on 15 June 2023 requires 2 update lines, 1 – 14 June and 15 – 30 June. You will need to create one element entry for each of the split periods.
- If the same reduction in hours and change from FT to PTR occurred on 15 April, 3 element entries are required: 1 – 5 April, 6 – 14 April, and 15 – 30 April.
TPS When Earned Details – Element Entry
Payments After Termination
The UK payroll process checks for a payment after an employee has left employment to ensure that the correct PAYE and National Insurance is calculated. The check is based on whether or not a P45 has been issued, automatically or manually. Using the same logic any pensionable payments made after a P45 has been issued will automatically be treated as “when earned” and the tier to be used to calculate pension deductions is based on the last day of pensionable employment.
The calculation method for the contribution tier will be reported as “WE”, with the appropriate contribution calculation date, and the previously paid and adjustment figures will be completed automatically.
| Scenario | Description | comment |
|---|---|---|
| Pay claim after termination - no earnings in previous period | A late pay claim is submitted by a worker on a PTIC contract after the termination date and there are no earnings in the period prior to the termination date, so there is no eligible compensation balance from which to determine the contribution tier as of termination date. | Create the TPS When Earned Details element entry for each updated line of service. |
| Backdated termination | Termination was recorded in the system with an effective date preceding the employee’s last MCR submission. For example, the June MCR submission was made 2023, and in July 2023, you learn that a late termination was recorded in the system effective 15 June 2023. | Create the TPS When Earned Details element entry for each updated line of service for the period(s) prior to termination. |
| Payment after termination - other changes in previous period | In addition to the late payment, there are other changes to the previously reported service period, for example, the adjustment of excluded days |
Create the TPS When Earned Details element entry for each updated line of service. If there were no other changes, the actual payment details are calculated and reported automatically, as “WE”. |
| Backdated pay award – no other earnings | If a payment after termination is due to backdated pay award arrears and the backdated pay award isn’t paid with any other earnings, the “WE” calculation method for the contribution tier is applied for teachers on regular contracts. |
Create the TPS When Earned Details element entry for each updated line of service. If there were other pensionable earnings, the actual payment details are calculated and reported automatically, as “WE”. |
Contractual Opt-Out
Follow the guidelines for contractual opt-out as shown in Pensions Automatic Enrolment and Functional Considerations (Doc ID 2006584.1).
If the member has opted out within the first 3 months of employment, the opt-out refund due indicator is ‘Yes’ and the qualifying scheme leaving date is the same as the joining date, then there is no subsequent processing and any refunds of pension deductions must be handled manually.
However, the calculation method for the contribution tier will be reported as “WE”, with the appropriate contribution calculation date, and the previously paid and adjustment figures will be completed automatically, based on the figures previously reported.
Usage of a TPS When Earned Details element entry is not required for this scenario.
Enrolment in Incorrect Scheme
If it’s identified within the first 3 months of employment that a member has been enrolled into TPS incorrectly follow the guidelines for Backdated Transfer from Qualifying Scheme to Another Scheme as shown in Pensions Automatic Enrolment and Functional Considerations (Doc ID 2006584.1).
If the member has transferred within the first 3 months of employment, and the opt-out refund due indicator is ‘Yes’, then there is no subsequent processing and any refunds of pension deductions must be handled manually.
However, the record action will be ‘D’ to delete the incorrect pension details, and the calculation method for the contribution tier will be reported as “WE”, with the previously paid and adjustment figures completed automatically, based on the figures previously reported.
You must create a TPS When Earned Details element entry for this scenario.
Refund of Contributions Due to Overpaid Salary
If a member has been overpaid pensionable earnings, for example paid as full-time when they were part-time, any refunds of pension deductions must be handled manually. You must create a TPS When Earned Details element entry for this scenario.
For example, an overpayment is discovered for the period May 1 to June 30, and the refund is processed manually in July. There would be two element entries in July for ‘TPS When Earned Details’, both with effective dates July 1 to 31. The start and end date entry values for each should match the update lines to be reported, May 1 to 31, and 1st June 1 to 30. For more details, see Worked Example: Overpayment due to a Change in Hours (Full-Time to Part-Time).
Enter the details as required. The entry values from Actual Pensionable Pay to Additional Contributions Amount are to be entered as the values used to calculate the refund, what should have been calculated if the change had been made at the correct time. Enter the previously paid entry values for the element start and end dates.
The MCR process will report updated values as entered in the element, for the start and end dates stated, and will calculate the adjustment figures. For example, the adjustment figure for employer contributions will be reported as the difference between ‘Employer Contributions’ and ‘Employer Contributions Previously Paid’ entry values.
The element ‘TPS When Earned Details’ can also be used to ensure that the correct details are reported for a late notification of termination, and a refund of overpayment has been received. The withdrawal confirmation would need to be reported as ‘W’.
Pension Scheme Formula Changes
Changes to the global pension calculator and global pension distributor formulas are required to support the processing of when paid and when earned scenarios and retroactive absences if your pension scheme elements were created prior to Release 23C.
Ensure you create a backup of your existing TPS pension scheme calculator formula. Then, update that formula as described here, inserting removing the strikethrough text and inserting the highlighted text as shown.
It is a prerequisite that the balance dimension 'Assignment Balance Date Period to Date' (ASG_NOCB_BDP_PTD) is added to the 'Eligible Compensation' balance.
Ensure you create a backup of your existing TPS pension scheme calculator formula. Then, update that formula as described here, inserting removing the strikethrough text and inserting the highlighted text as shown.