Minimum pension contributions are increasing

By law, the minimum amounts paid into automatic enrolment pension schemes are increasing.  Employers need to take action now to check whether and how they are affected.

Does this apply to me?

If you have set up an auto enrolment pension scheme for your employees, you need to make sure that both you and your employees are paying at least the required minimum amount into the scheme.

What do I need to do?

The increases to the minimum required levels are occurring in two phases – the first increase needs to be made by 6 April 2018 and the second by 6 April 2019.

You should review the minimum amount that you and your employees currently pay into the auto enrolment pension scheme. Current and future minimum payment levels for employers and employees are shown in the table below.  If you are already paying above the increased minimum amounts, you do not need to take any further action.
 
Date effective Employer minimum contribution Employee 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 are an existing client of the Moore Stephens Wealth Management team, we will be in touch to discuss the most cost-effective way of phasing pension contribution increases and how you can explain the changing contributions to your employees.

Salary exchange

An increase in employer costs from 1% to 2% next year and 2% to 3% in 2019 will need to be factored into business plans. These increases are not insubstantial, but where an employee contribution is required, some of the cost can be offset by introducing ‘salary exchange’ to pension contributions.

Salary exchange is an arrangement where the employee foregoes salary in return for a non-cash benefit such as a pension contribution. By ‘exchanging’ salary, both employers and their employees make savings. We are able to advise employers on how to do this effectively.

Inspection alert

The Pensions Regulator is beginning auto enrolment spot checks on employers nationwide. Inspection teams will be visiting hundreds of businesses across the country over the coming months to check that employers are meeting their responsibilities correctly.

The checks will help the Pensions Regulator to understand any challenges employers might be facing in order to offer help.  They will also enable the regulator to identify employers who are deliberately ignoring their auto enrolment duties and then take enforcement action against them.

As an employer, you have a duty to provide a pension scheme, to make contributions for your staff into that scheme and to declare your compliance with the Pensions Regulator.  The  regulator will be tough on employers who do not meet their duties on time. 

New employers: immediate auto enrolment duties

New employers establishing a payroll PAYE system from 1 October 2017 have an immediate duty to comply with auto enrolment from the contracted start date of their first worker. 

If you are establishing a new PAYE payroll, please get in touch for advice and support.

If you have any questions or concerns about any of the other issues raised, our team members will be happy to help.
 

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