INSIGHTS

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It is just over five years since the first employers started to automatically enrol eligible workers into a qualifying pension scheme but for your SME it may have been a lot more recently.

Up until 6th April 2018, the minimum contribution under auto enrolment rules has been set at 2% (of which the employer has been required to contribute at least 1% of the employee’s salary) However, on 6th April 2018 there will be an increase from the current total minimum contribution of 2% of qualifying earnings, rising to 5% (of which the employer must contribute at least 2% of qualifying earnings whilst employees make up the difference of 3%). Contributions will then rise again on 6 April 2019, eventually reaching a total minimum contribution amount of 8%. These changes will apply to all employers regardless of the size of their business and so even if you were part of the last wave of business to auto enroll employees you will still be subject to the changes.

When you initially rolled out your auto enrolment scheme you should have sent each eligible member a letter which set out that contribution levels will increase over time. If that was some time ago (and in fact even it was recently) it is likely that many employees will be unaware of these changes and the impact it will have on their income. So, although there is no legal requirement or additional duties for you to write to your employees about the increases you should consider reminding them about the change as it can provide an opportunity for employees to financially prepare for the statutory increases and potentially reduce the number of scheme leavers and opt outs.

Summary of Contribution changes

Effective Date Minimum Employer 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%

It remains the employer’s responsibility to ensure pension schemes are qualifying and that contributions are deducted accordingly, so, remember to contact your scheme and payroll providers to make sure that the change in contributions will be correctly calculated and paid.

You don’t need to take any further action if you don’t have any staff in a pension scheme for automatic enrolment, or if you are already paying above the increased minimum amounts and remember that these increases don’t apply to staff who asked to be put into a scheme that you don’t have to pay into.

For help and support with the upcoming changes to auto enrolment contact us at www.thehrhub.co.uk or call us on 0203 627 7048.