THE LAW
By law, minimum contributions will increase in two phases: 6 April 2018 and then again on 6 April 2019.
It’s important that you’re ready for the contribution increases so that the correct contributions are deducted at the right time, and that your pension scheme remains a qualifying scheme for members.
WHEN IS IT PLANNED?
These increases were originally planned to start in October 2017 but were subsequently moved to April 2018 in alignment with the tax year and payroll year.
Your company payroll will need to be aware so they can make any necessary adjustments.
WHAT HAPPENS NEXT?
From 6 April 2018:
The first increase will take the total minimum contribution from 2% of qualifying earnings to 5% of qualifying earnings (of which the employer must contribute at least 2% of qualifying earnings. Employees will make up the difference of 3%).
From 6 April 2019:
The second increase will take the total minimum contribution from 5% of qualifying earnings to 8% of qualifying earnings (of which the employer must contribute at least 3% of qualifying. Employees make up the difference of 5%).
The rules where pensionable earnings are defined as either Qualifying Earnings or Basic Earnings* are:
| Date | Employer minimum contribution | Employee contributions (before tax relief) | Employee contributions (after basic rate tax relief) | Total minimum contribution |
| Employer’s staging date to 5th April 2018 | 1% | 1% | 0.8% | 2% |
| 6th April 2018 to 5th April 2019 | 2% | 3% | 2.4% | 5% |
| 6th April 2019 onwards | 3% | 5% | 4.0% | 8% |
* Please note that where Total earnings or Basic earnings (SET 1) are used the total minimum contributions from 6th April 2019 are 7% & 9% respectively.
HOW CAN WE HELP?
Our support team are on hand to help with the following:
PENSION SCHEME
Your pension provider will expect contributions to reflect the new rates starting from the payment period within which 6th April 2018 falls. If you are having any issues please contact us immediately. Our ongoing support includes rectifying issues you may be having with pension administration.
PAYROLL SET UP
Your payroll needs to be set up to start deducting the new amounts from the payment period within which 6th April 2018 falls. If you are having issues please contact us immediately. Our ongoing support includes helping you set up your payroll to accommodate changes such as these.
EMPLOYEE COMMUNICATIONS
Although there are no additional duties under automatic enrolment for you to tell your employees about the increase to contributions, you might want to do so. This’ll help minimise queries and reduce the risk of some employees deciding to leave their pension scheme.We have appropriately worded templates that you can use to inform employees of the increased contributions. Please contact us for more information.
EMPLOYEE HELPDESK
Our help desk is manned by pension professionals. Your employees can contact us by phone or email to ask any pension related questions on such topics as:
- Pension Contributions
- Pension Transfers
- Retirement Options
- State Pension Benefits
This service is available now.
This is the first major change since the automatic enrolment legislation came into effect. There are many more planned for the future. Our ongoing commitment to you will help ensure you spend as little time as possible trying to understand the legislation. That’s what we’re here for.
