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Minimum pension contributions to increase this April

Posted on in Business News , Cycles News , Outdoor News

This April will see the start of increased pensions contributions for employers and their staff with the total minimum contribution rising from 2% to 5% this April.

pensionsThe minimum contributions that you and your staff pay into your automatic enrolment workplace pension scheme are increasing. This is also sometimes known as phasing.

It is the employers responsibility to make sure these increases are implemented.By law a total minimum amount of contributions must be paid into the scheme. 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 staff won't need to pay anything.

This table below shows the minimum contributions employers must pay and the date when they must increase:

 Date
Employer minimum contribution
Staff 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%

Increasing minimum contributions should be a straight forward task for you to do but there are a number of checks you will need to make and we encourage you to start in good time. The Pensions Regulator has information alerting employers to what they need to do and pension providers are also providing employers and staff with information.

Tell staff about the changes

While there is not a legal duty to tell staff about the increase, we encourage employers to have information they need about their staff's workplace pension and how it is changing. Our recent advertising campaign encourages staff to get to know their pension and appreciate its benefits and staff are likely to want to know about the changes.

It's the law

Nearly one million employers have now enrolled more than 9 million people and staff now expect a workplace pension. Automatic enrolment is creating a new savings culture and the increase in contributions is an important part of the policy to boost retirement outcomes.

We know most employers want to do the right thing for their staff and we are here to help. However we will take action if an employer is not meeting their responisbilities. Failing to make and maintain the correct pensions contribuitons could result in a fine or court action.

It is not enough to just comply with automatic enrolment laws by putting staff into a scheme. Employers must also meet their duties to contribute into their employees' pensions every month and they must ensure they are paying in at least the minimum.

Pension providers have a duty to tell us if an employer is not maintaining the correct contrbutions and staff can also use our anonymous whistleblowing service if they are concerned the correct payments are not being made.

Three things for employers to check

1) Will your payroll deduct the increases?
While many payroll providers may automate their software so contributions are increased automatically, employers should check if their payroll software will do this. Their payroll should be ready to deduct the increased contributions when they rise on 6 April 2018 and then again in April 2019, otherwise the right contributions might not be paid across to the scheme at the right time.

2) Is your pension scheme making the changes needed to support the increases?
Employers should also check their pension scheme is making necessary changes to support the increases and ensure they are continuing to use a qualifying scheme and the right amount of pension contributions are deducted. If an employer's chosen pension scheme doesn't support the increases, then they will need to talk to them about their options.

3) What are you currently contributing? You may not need to take action
Employers and their staff can also choose to pay in more than the minimum contributions if they want to and employers who are already paying above the increased total minimum amounts need not take any further action.

For more guidance on increasing contributions visit The Pensions Regulator website

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