Change in contribution rates – auto enrolment pensions
The Government has set minimum levels of contributions that must be paid to the workplace pension scheme by you and/or your employer.
These are set to increase in April 2018 from the current 1% to 2% for employers and from 1% to 3% for staff/employees, with a further increase due to in April 2019. See table below.
|From April 2018 inc to||3%||2%|
|From April 2019 inc to||5%||3%|
How will this affect me as an employee?
Your employer must pay some of the minimum total contribution. If the employer doesn’t pay all of the minimum total contribution, you will need to make up some of the difference.
The minimum total contribution to the scheme is usually based on your ‘qualifying earnings’. These are your earnings from employment, before income tax and National Insurance contributions are deducted, that fall between a lower and upper earnings limit that are set by the Government.
Earnings from employment can include your wages or salary, commission, bonuses, to name a few.
How will this affect me as an employer?
As the employer, you must make a minimum contribution towards this increased amount and your employees must make up the difference. If you decide to cover the total minimum contribution required, your employees won’t need to pay anything.
Automatic enrolment is a continuing responsibility for employers, and there are ongoing duties to carry out after your initial staging date.
For example, each time you pay your employees, including new starters, you must assess their age and earnings to see if they need to be put into a pension scheme, and how much you need to pay in.
Every three years you’ll need to put any of your eligible employees who previously opted out, or stopped saving into your pension scheme, back into it. This is called re-enrolment.