On 6th April 2018, and again on 6th April 2019, the rate for the minimum contribution to Workplace Pensions from both employees and employers is increasing.
All employers, with employees in a work place pension scheme, must take action to ensure at least the minimum amounts are being paid into their pension scheme.
This applies to you whether you set up a pension scheme for automatic enrolment or you decided to use an existing scheme.
If you’re using a defined benefits pension scheme then the increases do not apply.
Up to 5th April 2018
Employer minimum contribution 1%
Employee minimum contribution 1%
Total minimum contribution 2%
6th April 2018 – 5th April 2019
Employer minimum contribution 2%
Employee minimum contribution 3%
Total minimum contribution 5%
6th April 2019 – onwards
Employer minimum contribution 3%
Employee minimum contribution 5%
Total minimum contribution 8%
As an employer you can make the decision to move straight to the 6th April 2019 minimum rates from April 2018 if you wish to eliminate the need to make two changes.
By law a total minimum amount of contributions must be paid into the scheme. You as the employer must make a minimum contribution towards this amount and your employee must make up the difference. If you decide to cover the total minimum contribution required, your employee won’t need to pay anything.
This is not a change to pension scheme rules which requires legislative communications but we would recommend as good practice that you advise your employees in advance of the expected change to prepare them for the increase in their own pension contributions and your own pension provider should be able to help with this. With the contribution rate for employees tripling this will have a material impact on net pay for many.
If you offer a salary sacrifice we would advise you review communications issued and seek advice from your pension provider regarding any changes you may need to share with your employees.
There are also changes coming for the Auto Enrolment threshold rates:
- Earnings trigger is to remain at £10,000 per annum.
- Lower qualifying earnings will rise from £5,876 to £6,032 per annum.
- Upper qualifying earnings will increase from £45,000 to £46,350 per annum.
In addition, ensure your contracts of employment and/or employee handbook reflect your new contribution rates and we can help with this.