The minimum contributions that you and your staff pay into your automatic enrolment workplace pension scheme are increasing. This is also sometimes known as phasing.
It is your responsibility to make sure these increases are implemented.
There are two phases to the increases in minimum contributions. The first increase took place on 6 April 2018 and the second must be in place from 6 April 2019.
All employers with staff in a pension scheme for automatic enrolment must take action to make sure at least the minimum amounts are being paid into their pension scheme. This applies to you whether you set up a pension scheme for automatic enrolment or you decided to use an existing scheme.
However, you don’t need to take any further action if you don’t have any staff in a pension scheme for automatic enrolment or you are already paying above the increased minimum amounts.
Additionally, if you’re using a defined benefits pension scheme then the increases do not apply.
The amount you and your staff pay into your pension scheme will vary depending on the type of scheme you have chosen and the rules of that scheme. You can find this information in the scheme documents sent to you when you set up the pension scheme or you can speak to your pension provider.
Most employers use pension schemes that from April 2018 require a total minimum of 5% contribution to be paid. The calculation for this type of scheme is based on a specific range of earnings. For the 2018/19 tax year this range is between £6,032 and £46,350 a year (£503 and £3,863 a month, or £116 and £892 a week).
When you are calculating contributions for this type of scheme you include the following:
By law a total minimum amount of contributions must be paid into the scheme. You, the employer, must make a minimum contribution towards this amount and your staff member must make up the difference. If you decide to cover the total minimum contribution required, your staff won’t need to pay anything.
This table shows the minimum contributions you must pay and the date when they must increase:
|Date||Employer minimum contribution||Staff contribution||Total minimum contribution|
|Previous rates until 5 April 2018||1%||1%||2%|
|Current rates from 6 April 2018 to 5 April 2019||2%||3%||5%|
|6 April 2019 onwards||3%||5%||8%|
The staff contribution rate may vary depending on the type of tax relief applied by your scheme. If you are unsure check your scheme documents.
You may have agreed with your pension scheme to base minimum contributions on different elements of staff pay. If this is the case you will need to apply different increases.
Check your scheme documents to find out what elements of staff pay your scheme uses. If you are still unsure speak to your scheme provider.