Increase to your clients’ automatic enrolment minimum contributions
We’ve updated our systems to comply with the law around the increase in minimum pension contributions. So, now we’ve done our bit, it’s over to you to help your client do theirs…
So what does my client need to do?
They’ll need to log in to their Online Services account, where there will be alerts to tell them what they need to do depending on how their account is set up.
How to set up for the increase to minimum contributions
What your client needs to do depends on which journey applies to them.
Either way, they’ll need to make sure they’re paying higher contributions from the beginning of the payment period that includes the 6 April.
For example, if their pay period is 1-30 April, they’ll need to pay the higher contributions from 1 April.
Most employers will fit into one of two journeys:
- Journey 1 – If your client is set up on the minimum contribution increases (1% employer, 1% employee based on ‘qualifying earnings’) and has just one worker group, we’ll increase the percentages on our system for them. All they’ll need to do is to log in to Online Services and confirm the changes.
- Journey 2 – if their scheme isn’t set up on the minimum contributions (eg different contribution rates, or not based on ‘qualifying earnings’) and has more than one worker group – they’ll need to change the percentages on our system themselves. To do this they should log in to Online Services and update their worker groups to make sure they meet the new minimums.
There are alerts within their Online Services account to tell them what they need to do depending on how their account is set up.
If your client’s workforce is assessed by payroll software (and its working out their contributions) you’ll want to make sure your clients remain compliant. You (or your client) will need to get in touch with the payroll software provider to see how they’ll make sure this happens.
Remember – your client has a legal obligation to meet the new legal minimum contributions. If they don’t, we have a duty to monitor their contributions and may report on them to The Pension’s Regulator.
Some important information and dates
The increases were originally planned to start in October 2017, so your client’s preparations may already be underway.
However, the date was changed and the increase will now align with the start of each tax year as well as the payroll year (this makes it easier for payroll software to manage the changes).
It’s important for your client to start thinking about the increases and to note this change in date. Their company payroll will need to be aware so they can make any necessary adjustments, as will their IT department if they have bespoke payroll software.
So what happens next?
Your client might want to start planning ahead for the next two minimum contribution phases. Your client must take action to ensure at least the minimum amounts are being paid to their employees.
- From 6 April 2018:
The first increase will take the total minimum contribution from 2% of qualifying earnings to 5% of qualifying earnings (of which employers must contribute at least 2% of qualifying earnings whilst their employees make up the difference of 3%).
- From 6 April 2019:
The second increase will take the total minimum contribution from 5% of qualifying earnings to 8% of qualifying earnings (of which employers must contribute at least 3% of qualifying earnings whilst their employees make up the difference of 5%).
Tools to help your client tell employees about the change
We’ve made it easier to communicate the changes to their employees.
Although there are no additional duties under automatic enrolment for employers to tell employees about the increase to contributions, they may wish to do so. This will help minimise queries and reduce the risk of some employees deciding to leave their pension scheme.
Also there, they’ll find other helpful material like:
- Simple wording to put on employee payslips explaining the change
- Posters to raise awareness in your workplace
- An animation to explain the benefits of a workplace pension and how the change taking place in April affects them.
If you have any questions, it’s worth checking ‘help and support’ first, as we’ve got answers to all our most frequent questions.
More support on contribution increases
To help employers communicate the contribution increases to their employees, we’ll be providing template letters for them to use. And we’ll support them with other materials in the coming months, too.
Or for more guidance, download the Increases to minimum contributions guide »
The Pensions Regulator’s website provides more information on contribution increases.