IN Accountancy are reporting that the minimum contribution that you and your Staff pay into your auto enrolment workplace pension scheme is increasing.
It is both yours and our responsibility to make sure these increases are implemented accurately and timely.
When do the increases take effect?
Minimum contributions are increasing in two phases. The first increase must be in place from 6 April 2018 and the second from 6 April 2019.
Who does this apply to?
All Employers with Staff in a pension scheme for auto enrolment must take action to make sure at least the minimum amounts are being paid into their pension scheme. This applies to you whether you set up a pension scheme for auto enrolment or you decided to use an existing scheme.
You don’t need to take any further action if…
You don’t have any staff in a pension scheme for automatic enrolment or you are already paying above the increased minimum amounts or if you’re using a defined benefits pension scheme.
What are the increases?
The minimum Contribution under Auto Enrolment Legislation and the date when they must increase is as follows:
|Date||Employer minimum contribution||Employee contribution||Total minimum contribution|
|Until 5 April 2018||1%||1%||2%|
|6 April 2018 to 5 April 2019||2%||3%||5%|
|6 April 2019 onwards||3%||5%||8%|
You, the Employer, must make a minimum contribution towards this amount and your Staff Member must make up the difference. If you decide to cover the total minimum contribution required, your Employee(s) won’t need to pay anything.
These contributions are based on Qualifying Earnings which, for the 2017/18 tax year, is the total Earnings that fall in the band £5,876 to £45,000 per annum (£490 to £3,750 per month or £113 to £866 per week)).
Please note, when calculating total Earnings, you must include the following:
- All salary
- All wages
- All commission
- All bonuses
- All overtime
- All statutory sick pay
- All statutory maternity pay
- All ordinary or additional statutory paternity pay
- All statutory adoption pay
You can adopt an alternative Contribution basis to the Qualifying Earnings basis outlined above, which you may have done. You can find this information in the scheme documents sent to you when you set up the pension scheme or you can speak to your pension provider or us, if we manage your scheme.
What if my Employees don’t wish to increase their contribution?
Employees have until 6 April 2018 to opt out of the scheme. This is not something you as the employer or we can assist with. The employees must contact their pension provider/scheme administrator themselves in order to opt out.
Expert Opinion contributed by IN Accountancy