Following its introduction in 2012, Auto Enrolment (AE) is set to see the first increase in the minimum amounts employers and their staff pay into AE pension schemes from April 2018.
The first increase will pave the way for an increase in 2019, eventually reaching a total minimum amount of 8%. The current employer and staff minimum contribution of 1% each of qualifying earnings will rise to 2% for employers and 3% for staff on 6 April 2018.
If a pension scheme does not increase its minimum contribution levels in line with the legal requirements, it will no longer be a qualifying scheme for existing members and cannot be used for Automatic Enrolment.
Ahead of the increases, Mitchells Chartered Accountants and Business Advisers is urging employers to ensure their pension scheme trustees and providers, and payroll and software providers and products support the change to the minimum contribution to AE. Failure to comply with AE legal duties could see businesses face thousands of pounds in fines.
If you’re already paying above the minimum contribution, no further action need be taken. Both the employer and staff member can choose to contribute larger amounts if they wish to do so. If the employer pays at least the total minimum contribution, then the staff member need not pay any contribution at all, unless the specific scheme rules require this.
An overview of the Auto Enrolment scheme can be found in our previous article here. The upcoming changes are detailed below:
|Date effective||Employer minimum contribution||Staff contribution||Total minimum contribution|
|Currently until 5 April 2018||1%||1%||2%|
|6 April 2018 to 5 April 2019||2%||3%||5%|
|6 April 2019 onwards||3%||5%||8%|
If you have agreed to calculate your minimum contributions with your pension provider in a different way, then you’ll need to apply different increases. Information can be found at www.tpr.gov.uk/certified.
Employers still need to assess everybody that they employ, each time they are paid, and enrol them into a pension scheme if they meet the AE criteria.
There is now no grace period for employers Auto Enroling their staff. Since the 1 October 2017, all businesses that employ people immediately have legal pension duties for their new member of staff.
Liz Fisher, Mitchells’ Tax and Employer Solutions Manager, explained: “The increase in the minimum Auto Enrolment contributions should be straightforward but start your preparation ahead of the 6 April. It is the employer’s responsibility to ensure that the pension scheme they use to meet their duties is a qualifying scheme, and that pension contributions are deducted correctly. Unfortunately, if you don’t, you will be liable for big financial penalties. This is not a time to bury your head in the sand.”
Mitchells’ expert team can help take away the headache of pensions and Auto Enrolment, offering both cost effective pension solutions and ongoing administration to ensure your business remains compliant.
We have produced a handy document to explain the changes to your employees and what it means for them. You can print this and distribute individually to your employees or print and display in the office. Download here.
If you are interested in a free consultation to discuss how Mitchells can help you get ready for Auto Enrolment, or with any queries please get in touch with our expert team on 01246 274 121.