From April 2018, the minimum pension contributions made into auto enrolment schemes from employers and employees are to increase in two stages.
The increases are compulsory and it is the responsibility of the employer to ensure they are implemented correctly. The first increase is effective from 6 April 2018 and the second from 6 April 2019.
Who does this apply to?
All employers with staff in a pension scheme for automatic enrolment must take action to make sure 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 pension scheme. The employee’s earnings and age will determine if enrolment into a pensions auto enrolment scheme is compulsory and the obligations of the employer in terms of contributions. For example, employees earning above £10,000 pa will need to to be enrolled into the company’s pension scheme if they are between 22 and state pension age.
No further action is required if you are already paying above the increased minimum amounts or you don’t have any staff in a pension scheme for auto enrolment.
What are the amounts?
The table below shows the compulsory minimum amounts and the date when they must increase:
Date Employer min.contribution Staff contribution Total min. contribution
Until 5/4/18 1% 1% 2%
6/4/18 – 5/4/18 2% 3% 5%
6/5/19 onwards 3% 5% 8%
By law, a total minimum amount of contributions should be paid into the scheme. The employer must make a minimum contribution towards this amount and the employee must make up the difference. If the employer decides to cover the total minimum contribution, the employee won’t need to pay anything. The company must provide information to the Pension Regulator to show they are meeting their automatic enrolment duties and more on this can be found on the Pension Regulator website – http://www.thepensionsregulator.gov.uk/