Automatic enrolment pension contribution increases
05 April 2019
By law, the total minimum contributions your organisation must pay into its staff workplace pension schemes increases tomorrow, on 6 April 2019. This doesn’t necessarily mean an increase in employee contributions as some employers pay in more than the minimum requirement.
From 6 April, the total minimum contribution including employer and employee payments must be no less than 8% of qualifying earnings.
Your organisation must pay a minimum of 3%, however it can choose to pay more than the minimum contribution if it wishes. There are employers out there who cover the whole 8% so there are some employees in a fortunate position, who don’t have to contribute to their workplace pension at all.
|
Date effective |
Total minimum contribution |
Employer minimum contribution |
Staff contribute the remainder |
|
Current rates |
5% |
2% |
Up to 3% |
|
6 April 2019 |
8% |
3% |
Up to 5% |
Businesses need to be ready to calculate contributions using the new rates the first time the payroll is run from 6 April.
Your organisation may have agreed with its scheme provider to calculate minimum contributions in a different way. This is called certification, and details of what they need to do can be found on TPR’s website.
If your organisation already contributes more than the total minimum of 8% into staff workplace pension schemes, or it uses a defined benefit (DB) scheme for automatic enrolment, it doesn’t need to take any action. And if any staff asked to be put into a scheme that your organisation doesn’t pay into, the increases don’t apply to them.
11% of employers do not inform employees of pension contribution increases
On a final point, organisations should communicate with their workforce about any changes that are happening from 6 April 2019, especially if employee contributions are going to increase.
Those employees who notice a reduction in take home pay are surely going to go straight to the person who administers their pay to ask why this is. Lack of communication can also increase the likelihood of workers opting out of their workplace pension.
A CIPP poll revealed that although employers use a number of different methods to communicate phased increases to automatic enrolment pension contributions, 11% of respondents do not communicate the changes at all.
It's not too late to write to staff to let them know about the increase in contributions - letter templates are available on The Pension Regulator's (TPR) website.