Increases in minimum pension contributions – April 2019
Research published recently by The Pensions Regulator shows that the vast majority of staff are continuing
to save more into their pension following the increases in pensions contributions in April last year.
The on-going duties survey of employers showed less than 2% of staff in medium, small and micro businesses asked to leave their workplace pension as a result of the increase in contributions.
The survey also showed 47% of medium sized businesses are paying at least some or all of their staff more than the minimum employer contribution, with 25% and 22% of small and micro employers respectively paying more than the automatic enrolment minimum.
In April this year, the minimum contributions will increase again from 5% to 8%. The breakdown of the increases can be seen below.
|Date effective||Employer minimum contribution||Staff contribution||Total minimum contribution|
|New rate: 6 April 2019||3%||5%||8%|
|Current rate: 6 April 2018 to 5 April 2019||2%||3%||5%|
Increasing contributions should be a straightforward task for you to do but there are a number of checks you need to make and we encourage you to start in a good time. TPR has information alerting employers to what they need to do.
While it’s not a legal duty to tell staff about the increase, we encourage employers to have the information they need about their staff’s workplace pension and how it is changing. Our research shows most employers told their staff about the increases last year and when asked by their workers about workplace pensions, they felt they had the information they needed.
The vast majority of employers are successfully meeting their automatic enrolment duties and it’s now business as usual for them. Automatic enrolment is creating a new savings culture and the increase in contributions is an important part of the policy to boost retirement outcomes.
We know most employers want to do the right thing for their staff and The Pensions Regulator is here to help. However, they will take action if an employer is not meeting their responsibilities. Failing to make and maintain the correct pensions contributions could result in a fine or court action.
It is not enough to just comply with automatic enrolment laws by putting staff into a scheme. Employers must also meet their duties to contribute into their employees’ pensions every month and they must ensure they are paying in at least the minimum. Pension providers have a duty to tell The Pensions Regulator if an employer is not maintaining the correct contributions and staff can also use our anonymous whistle-blowing service if they are concerned the correct payments are not being made.
Three things for employers to check:
- Will your payroll deduct the increases?
While many payroll providers may automate their software so contributions are increased automatically, you should check if your payroll software will do this. Your payroll should be ready to deduct the increased contributions when they rise in April 2019.
- Is your pension scheme making the changes needed to support the increases?
You should also check whether your pension scheme is making necessary changes to support the increases and ensure they are continuing to use a qualifying scheme and the right amount of pension contributions are deducted. If your chosen pension scheme doesn’t support the increases, then you’ll need to talk to them about their options.
- What are you currently contributing? You may not need to take action
Employers and their staff can also choose to pay in more than the minimum contributions if they want to and employers who are already paying above the increased total minimum amounts need not take any further action.
- Guidance for employers including a letter template to tell staff about the changes: tpr.gov.uk/increase
- For information relating to specific scheme rules, contact the pension scheme provider.
Source: The Pensions Regulator