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Auto Enrolment – Further Increased Contributions

The law on workplace pensions has changed. Every employer with at least one member of staff is required to put those who meet certain criteria into a workplace pension scheme and contributing towards it.

This is called automatic enrolment. It’s called this because it’s automatic for your staff – they don’t have to do anything to be enrolled into your pension scheme. But it’s not automatic for you. You need to take steps to make sure they’re enrolled.

The current qualification for automatic enrolment is:
• You are aged between 22 and State Pension age
• You earn at least £10,000 per year
• You usually work in the UK

From 6th April 2018 the current deduction from an employees pay will rise from 0.8% to 2.4% with an additional rise to 4% in April 2019.

These increased contributions will lead to a reduction in take home pay and some employees may opt-out altogether. However, they do pose a great benefit to people saving for their retirement with figures calculated for the BBC (on their News Site) suggest it could make the difference between earning more than £18,000 a year in retirement, or as little as £1,000, on top of the state pension.

Employers will be expected to contribute from 1% to 2% in April 2018 with a further increase to 3% in April 2019 onwards.

These contributions and increases are required by law, so HR Departments do not need to consult with their staff. However, it would be beneficial to write to those who qualify and pay at the minimum contribution to remind them that an increase will occur and how that will affect their take home pay.

If an employee chooses to opt-out or opt-down then the employer does not need to continue making any contributions. Even if they have opted-out they will be re-enrolled every three years or if they change jobs.

From the mid-2020’s every employee that is 18 or over will be able to save into the workplace pension.

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