Increase to automatic enrolment minimum contributions – it’s the law

Have you checked you’re meeting the higher contribution levels?

By law, minimum contributions for automatic enrolment increased on 6 April 2018 and are to go up again on 6 April 2019. You need to make sure you’re remaining compliant and paying the correct contribution amount.

So what do I need to do?

You should have taken action before the start of the pay period that includes the 6 April 2018.

If you’re yet to make necessary changes, you’ll need to log in to Online Services, where there will be alerts to tell you what you need to do depending on how your account is set up.

 

Log in to Online Services »

 

To help you with this, download our handy ‘Increases to minimum contributions’ guide »

Remember – you have a legal obligation to meet the new minimum contributions. If you don’t, we may report to The Pensions Regulator, as we have a duty to monitor contributions.

Telling your employees about the increase in pension contributions

Although there are no additional duties under automatic enrolment for you to tell your employees about the increase to contributions, you may wish to do so. This will help minimise queries and reduce the risk of some employees deciding to leave the pension scheme.

Check out our template letters in the communications toolkit »

There, you’ll also find helpful material like:

  • Simple wording to put on employee payslips explaining the change
  • Posters to raise awareness in your workplace

Visit our communications toolkit to tell your employees about the 2018 change »

If you have any questions, it’s worth checking our help and support first, where you’ll find answers to all our most frequent questions.

How much do you now need to pay, and what’s your future commitment?

How much you need to pay depends on how much each employee earns.

Qualifying earnings is the name given to a band of earnings you can use to calculate minimum contributions. For the 2018/19 tax year this is between £6,032 and £46,350 a year. So currently, you’re not required to pay anything on the first £6,032 they earn a year, or on anything they earn above £46,350 a year. The government will review the figures every year.

Help and support: What are qualifying earnings? »

The amount you must pay went up on 6 April 2018 to at least 2% of any earnings between those two figures. So, if an employee earns £16,032 a year, you have to pay at least 2% of £10,000.

You’re required to contribute at least the ‘employer minimum contribution’ into an employee’s pension as shown in the table below. Then the total contribution is reached by adding the employee’s contribution (deducted from their earnings) and tax relief from the government.

And, if you wish, you can choose to pay the full amount yourself (increased to 5% on 6 April 2018 and 8% from 6 April 2019) so your employees don’t have to – as an important employee benefit, this may help your recruitment efforts.

The table below is based on an employer calculating their minimum pension contributions on qualifying earnings.  These percentages can vary if an employer calculates contributions using different elements of pay. The Pensions Regulator website tells you more about calculating pension contributions.

Employer minimum contribution Employee contribution Tax relief on employee contribution Total minimum contribution
Until 5 April 2019 2% 2.4% 0.6% 5%
6 April 2019 onwards 3% 4% 1% 8%

This table is based on the ‘tax relief at source’ method of claiming tax relief. Read more on the two methods of tax relief.

However, if the current contributions from you and your employees already meet the minimum requirements for the new legal minimums, you won’t have had to do anything. And you’ll just need to prepare for the next increase on 6 April 2019. You may wish to continue to pay contributions above the employer minimum levels so that your employees continue to enjoy an enhanced employee benefit.

An important note about contractual enrolment

If your employees have become members of the pension scheme through contractual enrolment, you may need your employees’ consent to increase their contributions. This is only if the authority (often obtained via the terms of employment contract to deduct pension contributions from their salary) did not include the phasing of automatic enrolment minimum contributions for April 2018 and April 2019.

 Help and support: What’s contractual enrolment? »

Need to know more about contribution increases?

Visit Help and support: Contributions »
Or for more guidance, download the Increases to minimum contributions guide »
Check out our communications toolkit »
Read what we’ve told employees about these contribution increases »

Visit The Pensions Regulator website »
Email us at support@bandce.co.uk

Next: Transferring old pension schemes

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