Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it. This is called ‘automatic enrolment’. If you employ at least one person you are an employer and you have certain legal duties.
The minimum contribution that an employer and employee pay into the pension scheme is increasing from April 2018. The Pensions Regulator (TPR) is contacting employers about the increase in the minimum contributions, that employers and employee must pay into an automatic enrolment pension scheme.
When does the increase take effect?
The minimum contributions are due to increase over two phases. The first increase is from 6 April 2018, and the second from 6 April 2019. The first phase of the increases was originally due to start from October 2017. However, in April 2015 these dates were changed by the government to start from 6 April 2018.
Who does this apply to?
All employers must make sure they pay at least the minimum contributions into the pension scheme. If employers are already paying above the increased minimum amounts, there is no need to worry or make any changes.
What are the minimum contribution rates?
| Date effective | Employer Minimum Contribution | Staff Contribution | Total Minimum Contribution |
| Currently until 5 April 2018
|
1.00% | 1.00% | 2.00% |
| 6 April 2018 to 5 April 2019
|
2.00 | 3.00% | 5.00% |
| 6 April 2019 onwards
|
3.00% | 5.00% | 8.00% |
What are the next steps?
Ensure the pension supports the automatic increases in minimum pensions contributions. If a pension scheme does not increase its minimum contribution levels in line with the legal requirements, it will no longer be a qualifying scheme for existing members and cannot be used for automatic enrolment
Understand how these changes will affect the organisations, eg ensure that any new funding bids allow for the increase In the contribution.
Employees should know what is happening. There are no additional duties under automatic enrolment for employers to advise members about these increases, however they may wish to do so to help minimise queries, or reduce the number of workers subsequently leaving their schemes. Employers should still be mindful of the need to consult their members if changes are made to the minimum contribution levels before the 6 April changes to contribution rates.
Will the pension provider communication directly with the members? They should at least provide template letters.
Click here for further information about the changes.
