By law, on 6 April 2019, all employers are required to increase their contributions into their staff’s automatic enrolment pension, with the employer paying a minimum of 3% towards the pension, and the total minimum contribution reaching 8% – with staff making up the 5% difference.
The table below shows the minimum contributions employers who set up a defined contribution scheme for automatic enrolment must pay, and the date when they must increase. This is calculated based on earnings between £5,824 to £43,000 per year (£486 to £3,583 per month, or £112 to £827 per week), and including certain elements of pay.
|Date effective||Employer minimum contribution||Staff contribution||Total minimum contribution|
|6 April 2018 to 5 April 2019||2%||3%||5%|
|6 April 2019 onwards||3%||5%||8%|
What employers need to do
You can choose to pay the full amount of the total minimum contribution. This may mean staff do not have to pay in at all, unless the scheme’s rules say that they have to make contributions. Both the employer and their staff can choose to contribute more than the minimum amounts to the pension if they want to.
If employers pay in more than their legal minimum contribution, but less than the total minimum contribution shown in the table, then staff will need to pay in at least enough to make up the shortfall between these amounts.
The increase in minimum contributions should be simple to do, but employers need to start thinking about the increases early, and plan ahead for when they come into effect in April 2019:
• It is important that your workplace pension scheme and payroll software are able to support the contribution increases by 6 April 2019, otherwise the schemes used by employers may no longer qualify for automatic enrolment, and the correct contributions might not be deducted at the right time.
• Pension schemes should already be making necessary changes to support the increases, and will communicate this, but it is your responsibility as employer to make sure you are using a qualifying scheme, and that the right amount of pension contributions is deducted. If your chosen pension scheme does not support the increases, then your clients will need to talk to you about their options.
• While there is no legal requirement for you as employer to write to your staff, this is something that you may want to consider doing to help minimise queries, or to reduce the number of workers who decide to leave their schemes as a result of the increases. Your pension scheme provider should be able to help with this.
Automatic enrolment is a continuing process for employers – it does not end once they have put their staff into a workplace pension.
There are ongoing responsibilities that need to be completed after they have submitted their declaration of compliance. To stay compliant, they will need to:
• assess the age and earnings of their staff who are not enrolled in a workplace pension each time they pay them, to see if they need to be put into one
• work out how much money they need to pay into their staff’s scheme every time they pay them
• continue to make the payments that are due into the scheme every time they run payroll
• write to staff to let them know what is happening
• keep records relating to their workplace pension scheme
• manage any requests from staff to join or leave the scheme.
Keep paying in
Employers must continue to make the payments that are due into their scheme every time they run payroll. Simply setting up a pension scheme and enrolling their staff is not enough; they must continue to make contributions into it.
Under re-enrolment, every three years, employers must assess their staff, and put all eligible workers into their workplace pension – including anyone that has previously left or opted out of the scheme.
Re-enrolment follows the same process as when employers first put their staff into a workplace pension, and it must be completed for all employees that meet the age and earnings criteria. If an employee only left the scheme within the last 12 months, then your employers can choose whether or not to re-enrol them.
If you need any help or assistance with setting up your Automated Pension Scheme or running a payroll scheme, please contact your local Rothmans branch, and they will be able to assist you with this service.