Pension Contribution Changes

By January 2, 2018Payroll Outsourcing

Be prepared for the Auto-Enrolment Pension Contribution Changes!

There are auto-enrolment pension contribution changes that employers need to be aware of to make sure they are compliant this April.

The last employers to stage for their pensions will be in February 2018, then all employers will be involved with pensions in some way.  Even if an employer is not required to provide a pension scheme they will still need to make a declaration with The Pensions Regulator.

Most companies have chosen a tiered start to auto-enrolment, with the current default of 1% from the employer and 1% from the employee giving a total contribution of 2%.  When auto-enrolment pensions were launched in the UK the original 2% was to have increased in October, but now it will be increasing this coming April.

All new employers already have their pension duties starting from day one, and will need to comply with the current minimum contributions.  This means in April new employers will start with the 5% minimum the same as everyone else.  Ultimately there will be no tiered start at all.

Pension Contribution Changes

From the 6th April 2018 the following rates will apply –

5% minimum total contribution.  2% minimum from the employer with the employee to make up the remainder.

If an employer uses pensionable pay, and has self-certified the scheme’s compliance using set 1, then the total minimum contribution is 6%, with 3% minimum from the employer and the remainder from the employee.

So from April 2018 most employers will need to increase their contribution rates to remain compliant with the pension legislation.

The total can be made up wholly of an employer contribution, but can be split with an amount from the employer and the remainder from the employee.  There are minimum amounts for the employer as well as a total, as shown above.

Looking Ahead

April 2019 is when the contributions arrive at the targeted 8% for everyone.  For employers with self-certified schemes it may be slightly different, but for everyone else it is 8% with 3% minimum from the employer.

These changes should not present an issue, but companies need to make sure they are aware and the appropriate minimums applied.  For further information see here.