Pension contribution increase!

As of today, 6th April 2018, employers must provide a pension which contributes at least 5% of the staff members qualified earnings. The employer must contribute a minimum of 2% and the staff member must make up the shortfall. The total contributions can exceed 5% if the employer or employee want to contribute more.

These rates are also due to increase next year.

Date effective Employer minimum contribution Staff contribution Total minimum contribution
Old rates, up until 5 April 2018 1% 1% 2%
Currently, from 6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%
    Don’t get caught out!
  1. Make sure your pension scheme is qualifying
  2. Make sure the right amount is deducted
  3. Make sure your staff know what is happening

These are all responsibilities of the employer. Letters to employees should have been sent when the scheme began, to notifying them that the contributions will rise over time. Therefore it is not necessary to notify them of this change, however an employer may still wish to do so to minimise queries.

The Pensions Regulator have set out a flow diagram to help employers understand their duties – minimum-contribution-increases-flow-diagram

For some, this change won’t be noticeable. For others, they may feel there is too much of an impact on their income. Employees may want to ‘cease active membership’, meaning they will no longer be in the pension scheme. They may be entitled to a refund of contributions depending on scheme rules. The option to opt out is very unlikely to still be available as this must be done within one month of being enrolled. An employer CANNOT force an employee to leave the scheme.

If you have any queries regarding auto enrolment, or your duties, please do contact a member of the team on 01280 875250.



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