Auto-enrolment- new minimum %s from 6/4/18
New regulation means 1.8 million small business owners in the UK will have to offer an auto-enrolment pension scheme for employees. Auto-enrolment makes it compulsory for employers to enrol eligible workers into a pension scheme, paid into jointly by both the employee and employer.
As it currently stands the auto enrolment minimum contribution is 2% of which 1% must be paid by the employer, however in the tax year to come this is set to change:
- 06/04/18 – 05/04/19: Minimum contribution will be 5% (including 2% minimum employer contribution and 3% staff contribution).
- 06/04/19- onwards: Minimum contribution will be 8% (including 3% minimum employer contribution and 5% staff contribution).
If you already have a workplace pension scheme in place and use automatic enrolment your increase may differ to those above, so please check with your scheme.
What do you need to know as an employer?
- If your pension contributions are expressed as a % of earnings then you need to confirm salaries with you pension provider.
- When paying your contribution you need to decide what elements of pay are used to calculate this (shall you include only basic pay or include bonus/overtime as pensionable too).
- Pay on time otherwise you risk being fined by the regulator.
- The law requires that when you deduct contributions from your employee’s pay you must pay this into your scheme no later than the 22nd of the month.
- Employees should enrol into your scheme before February 2018.
Who must you enrol?
Eligible workers are those who:
- Aren’t already in a pension scheme.
- Aged between 22 and the state pension age.
- Earn at least £10,000/year
- You can also enrol non-eligible workers and entitled workers if they wish, so long as they fit the criteria set by government.
Act now to prepare for these changes:
- Check that you’re ready to calculate and deduct the increased contributions to ensure you pay right correct amount on time.
- Ensure your pension schemes and payroll software can support contribution increases.
- Communicate increases with your staff.
For more information on this visit thepensionsregulator.gov.uk/minimum-contribution-increases-planned-by-law-phasing