Auto Enrolment Minimum Contribution Levels Are Increasing

All employers are legally obliged to enroll/re-enroll their eligible employees into a workplace pension scheme. They must ensure that the minimum pension contributions for employers and employees are being paid on time. Auto Enrolment minimum contribution levels are increasing in April 2019…

The Pensions Act 2008

Under the Pensions Act 2008, every employer in the UK must put their qualifying employees into a pension scheme and pay contributions. This is called ‘automatic enrolment’. Every three years, employers must put certain staff back into a pension scheme. This is called ‘re-enrolment’. 

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Minimum Contributions

The amount employers must contribute to the pension scheme is determined by the scheme’s rules. However, if you’re using the scheme for automatic enrolment there are minimum contributions you must pay. The contributions that you must pay into your staff’s pension scheme, and the date when they must increase, are shown in the table below.

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Auto Enrolment Minimum Contributions

The annual increases were intended to help employees get used to saving regularly for their retirement, and the remaining planned increase will occur on 6 April 2019.  

Minimum pension contributions for Auto Enrolment are calculated based on earnings between £5,824 to £43,000 per year (£486 to £3,583 per month, or £112 to £827 per week), and including certain elements of pay. The law requires that when you deduct contributions from your staff’s pay you must pay these to your staff pension scheme no later than the 22nd day (19th if you pay by cheque) of the next month.

Avoid penalties

You can avoid penalties by: 

  • Keeping records of automatic enrolment activities (such as names and addresses of staff you’ve enrolled, records of when contributions were paid into the pension scheme, opt-in/opt-out notices sent to employees, information sent to the pension provider, for example).
  • Monitoring the ages and earnings of new and existing staff and checking their automatic enrolment eligibility every month (payroll software can help you do this). 
  • Writing to staff to let them know how automatic enrolment applies to them.
  • Enrolling staff as and when they become eligible.
  • Ensuring that contributions are paid into the pension scheme on time.

What should you do to prepare?

You should review your workplace pension scheme to see if the increased contributions apply automatically to your employees. If not, you may need to make contractual changes to increase member contributions. A minimum 60 day consultation period is normally required before any changes can be applied.

For detailed information on Auto Enrolment you should consult the Pension Regulator.

If you require assistance with your Auto Enrolment and Payroll obligations please email me in confidence via the contact page.

© 2018 Paul J Lockey

Image credit: rawpixel on Unsplash

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