Pensions Auto Enrolment: Compulsory Minimum Contribution Increases - are you ready?

Since the first employers reached their staging date in 2012 the statutory minimum contributions into a qualifying workplace pension scheme have remained static. Now that the phasing in of automatic enrolment is complete and all UK employers are operating under the new regulations the minimum contribution rates into defined-contribution schemes are set to increase.  

What you need to know

 

Employer

Total

Currently, to 5th April 2018

At least 1%

2%

6th April 2018 to 5th April 2019      

At least 2%

5%

6th April 2019 onwards

At least 3%

8%

If you have decided to calculate the minimum contributions on different elements of staff pay you may need to apply different increases.

How might this affect your business?

All businesses are unique and will face different challenges but, broadly speaking, common considerations are likely to include:

  • Have the increases to employer contributions been budgeted for?
  • Might more employees choose to cease contributions into the pension scheme?
  • Is your payroll department and/or outsourced payroll solution ready to cope with the increases?
  • Would now be a good time to revisit your auto-enrolment and postponement options? 
  • Will a review of staff handbooks and/or employee contracts be necessary?
  • Where salary sacrifice is utilised, might the increased contributions have an impact on compliance with minimum wage regulations?

How might this affect your employees?

When a member of staff was first automatically enrolled, the letter they received from you (or your pension provider) will have confirmed that contributions will automatically increase over time. As such, there is no legal requirement to communicate the upcoming changes to your employees. It is however considered good practice to raise awareness of this matter now that it is relevant, in order to help all parties understand what will happen, when and why. This allows employees the time to plan, ask questions and consider their options. Issues you may want to cover include:

  • Reference to previous automatic enrolment communications (e.g. At staging) and the upcoming changes notified at that time
  • The impact these changes will have on their net take-home pay
  • The practicality of reviewing their retirement savings annually, including referral to a financial adviser if appropriate
  • The option to increase employee contributions
  • The potential impact of ceasing active scheme membership

It is vital that all employee communications are clear, easy to understand and avoid any potential misinterpreted inducement to opt-out.

How can Sheen Stickland help?
 
Sheen Stickland payroll services can assist you at every stage of the Auto Enrolment process, from guaranteeing the accurate and ongoing assessment of your workforce and ensuring all regulatory duties are met, to operating your entire pension provision for you on your behalf.
 
If you would like to discuss how Sheen Stickland can assist you in fulfilling your pensions auto enrolment duties please contact our payroll manager Melanie Dunford on 01420 83700 or email mdunford@sheen-stickland.co.uk

 

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