Further increase to auto enrolment minimum contributions
A second increase to auto enrolment (AE) minimum contributions will come into effect on 6th April 2019. Employers will need to be ready for the increase and notify staff of the changes.
Our article in January 2018, ‘Be ready for the increase in minimum contributions for auto enrolment pensions’, detailed the minimum contribution increases set to take place in 2018 and then again in April of this year. From April 2019 employers must contribute 3% to the AE pensions of eligible employees.
|Date effective||Employer minimum contribution||Staff contribution||Total minimum contribution|
|Until the 5 April 2018||1%||1%||2%|
|6 April 2018 to 5 April 2019||2%||3%||5%|
|6 April 2019 onwards||3%||5%||8%|
To ensure you are a compliant employer, you will need to take action to increase your own and your employees’ contributions. You will also need to tell staff that this is happening as their own contributions will go from 3% to 5%.
Employers can opt to pay higher than the set 3% rate to subsidise their staff’s contributions, providing the combined amounts add up to a total 8% input.
Employers can choose to cover the full amount of the total minimum contribution, unless the scheme rules state that a contribution from staff is required.
Both you and your employees can pay more, so that the contributions exceed the total minimum contribution.
What to look out for
Employers still need to be aware of differences posed by salary exchange or salary sacrifice schemes to ensure that the increase rate of contributions does not mean that earnings fall below the National Minimum Wage or National Living Wage rates.
They should also be careful with those who make fixed monetary rate contributions to ensure they meet the correct percentage of overall contribution required.
If we are your payroll provider, we will ensure that your auto enrolment process is ready for the increase and notify you of any changes that are necessary. If we do not handle your payroll, we recommend getting in touch with your payroll provider to ensure that they are prepared.
For more information on payroll, auto enrolment and the changes to the minimum contributions, please contact Susan Elsdon.