The minimum contributions that you and your staff pay into your automatic enrolment workplace pension scheme are increasing. This is also sometimes known as phasing. It is your responsibility to make sure these increases are implemented.
When do the increases take effect?
Minimum contributions are increasing in two phases. The first increase must be in place 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 scheme.
However, you don’t need to take any further action if you don’t have any staff in a pension scheme for automatic enrolment or you are already paying above the increased minimum amounts.
Additionally, if you’re using a defined benefits pension scheme then the increases do not apply.
What are the increases?
The amount you and your staff pay into your pension scheme will vary depending on the type of scheme you have chosen and the rules of that scheme. You can find this information in the scheme documents sent to you when you set up the pension scheme or you can speak to your pension provider.
Most employers use pension schemes that currently require a total minimum of 2% contribution to be paid. The calculation for this type of scheme is based on a specific range of earnings. For the 2017/18 tax year this range is between £5,876 and £45,000 a year (£490 and £3750 a month, or £113 and £866 a week).
When you are calculating contributions for this type of scheme you include the following:
- statutory sick pay
- statutory maternity pay
- ordinary or additional statutory paternity pay
- statutory adoption pay
By law a total minimum amount of contributions must be paid into the scheme. You, the employer, must make a minimum contribution towards this amount and your staff member must make up the difference. If you decide to cover the total minimum contribution required, your staff won’t need to pay anything.
For further information about auto-enrolment or any other payroll matters please feel free to call us on 01244 332 886
The Pensions Regulator