As the 6 April 2019 fast approaches employers must prepare to increase the minimum contributions that they and their employees are paying into their pensions under auto-enrolment (AE) legislation. 

The new minimum contributions will be set at 3 per cent employer and 5 per cent employee (8 per cent total contribution) in comparison to the current rates of 2 per cent employer and 3 per cent employee (5 per cent total contribution).

 However, any employers who have workplace pension schemes in place which they self-certify for use with automatic enrolment will have different minimum contribution increases, depending on how pensionable pay is calculated.

For example, if contributions are based on gross earnings but don’t include bonus, overtime, commission or certain staff allowances (such as shift pay or relocation allowance), the employer must pay a minimum of 4% towards the pension, and the total minimum contribution is 9%. However, if contributions are based on all elements of staff pay and all earnings, the employer need only pay a minimum of 3% towards the pension, and the total minimum contribution is only 7%.

Further information, and a template letter to send to staff to tell them about the changes,can be found here. 

 

Noel Guilford