As Auto Enrolment pension contributions are set to rise, we look at the implications for workplace pensions for both employers and employees.

Employers will need to take action to update their payroll software or by contacting their payroll provider to make sure the correct contributions are being made, in order to avoid fines from the Pensions Regulator.

The table below indicates the minimum contributions to be paid for defined contribution Auto Enrolment pension schemes, based on earnings of between £5,876 and £45,000 per annum (known as qualifying earnings).

Date effective Employer minimum contributions Employee minimum contribution Total minimum contribution
Up to 5 April 2018 1% 1% 2%
6.4.2018 to 5.4.2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

These contributions as highlighted, must increase to at least these levels above from April 2018 and April 2019.

For the majority:

For businesses and organisations who are applying the minimum statutory contributions based on qualifying earnings, the necessary increases that will need to be applied from April 2018 and April 2019 respectively are relatively easy to apply through payroll software or payroll provider.

These statutory increases however must be applied to help avoid potential Pension Regulator fines being levied. Similarly, for those businesses or organisations who have contractual enrolment and qualifying pension schemes with contribution levels in excess of the increases from April 2018 and April 2019, no further action will need to be taken.

For the Minority:

It is for those businesses and organisations who are not applying the minimum statutory contributions based on qualifying earnings where more careful consideration is required.

For example, if the current employee contribution rate is 0% and employer rate is 2% of qualifying earnings, does the employer intend keeping the same scenario in place by increasing the employer rate to 5% from 1 April 2018 to ensure compliance, or does the employer intend for the employee to start contributing from this point?

Either way, if the payroll is processed in-house, businesses and organisations will need to apply increases to at least the statutory minimum level from April 2018 and 2019. If the payroll is outsourced, they will need to engage with their payroll service provider to confirm what should be applied from these dates to ensure compliance.

Bishop Fleming Payroll Services will be engaging our payroll clients who fall into this category shortly.

For help and guidance please contact Lee Hellingsworth from Bishop Fleming Payroll Services on 01803 206421.


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