Pension Contributions due to increase

Due to changes in respect of auto enrolment that are coming into force on 6 April 2018, employers may be required to increase the amount of their contributions into their automatic enrolment pension.

From the 6 April 2018 employers will have to contribute a minimum of 2% and staff members will have to make up the balance, to the minimum total contribution 5%.

The minimum contribution levels will increase again on 6 April 2019, so that the employer is paying a minimum of 3% towards employees’ pension. The total minimum contribution will also be increased to 8% with the employee making up the balance.
The table below demonstrates the changes that are coming in to affect;

 Employer minimum contributionEmployee contributionTotal minimum contribution
Until 5 April 20181%1%2%
6 April 2018- 5 April 20192%3%5%
6 April 2019 onwards3%5%8%

If the employer chooses to increase their contributions above the minimum employer contribution, the employee can reduce the amount they contribute as long as the total contribution reaches the total minimum contribution.
Alternatively the employer can pay the total minimum contribution so that the employee is not required to pay any contribution unless the scheme rules require an employee contribution.

The employee and employer can choose to contribute amounts that are greater than the minimum if they so wish.

How to communicate the changed to your employees

Whilst the initial letter that should have been issued to new employees, when they are first enrolled on the company’s work place pension, will have stated that the contribution levels will increase over time, meaning there are no requirements to communicate the changes with staff. We would suggest making sure they are aware that the changes are taking place before the 6 April 2018.

This will give the employees chance to raise any queries that they may have and consider the option of increasing their contributions above the minimum total contribution.

If you require help in communicating the changes to your employees we will be more than willing to provide a template letter.

How we can support you with the changes

The changes should be easy to implement but early preparation will be needed. It is the employer’s responsibility to ensure that the pension contributions are deducted correctly.

We at Thompson Balch along with our selected advisors are able to help and support employers to ensure that the rate increase is implemented correctly and efficiently.

If you have any queries regarding the Auto Enrolment rate changes, or any other payroll related issues, we would love to hear from you on tel +44 (0) 1908 262646 or follow us on Facebook.