Auto enrolment contributions are increasing

There’s a payroll chore this month if you have an auto enrolment pension scheme. And, more significantly, a higher ongoing cost burden for employing people.

From 6th April 2019, the minimum percentage of salary that you must contribute to eligible employees’ auto enrolment pensions is increasing from 2% to 3%. The overall contributions rise to 8% of salary each month. So for staff, their minimum contributions are rising from 3% to up to 5%, depending on the amount you decide to put in.

As the employer, it is your responsibility to ensure that these increases are implemented. You’ll need to assess which employees are affected, make the necessary adjustments to your payroll and communicate the changes to your staff. The Pensions Regulator does have the power to issue fines for non-compliance with April’s rises. We’d also advise reviewing your budgets to ensure they can account for the extra cost.

 

Please note that, depending on your pension scheme rules, there may be a provision for your employees to avoid their contribution rises. It is known as opting down. You can refuse an opt-down request but, if you permit it, your employee would have to go through the auto enrolment process again as required.

It’s important to flag that you are not allowed to actively promote opting down, as it goes against the intention of the legislation, and can have knock-on effects that disadvantage your staff. Therefore we only mention this so you are informed, in case your staff raise it with you.

For more information, contact Mel Wigley at The HR Dept: Mel.Wigley@hrdept.co.uk.