Auto enrolment contributions increase: Don’t get caught out!

For tax year 2018/19, one additional task that employers need to be aware of is the increase in statutory minimum pension contributions for auto enrolment.

From 6th April 2018, all employers must ensure they make the necessary adjustments to ensure compliance with the Automatic Enrolment legislation.

How much extra will employers & employees have to pay?

This depends on what salary definition the employer bases their pension contributions on. For example, in most cases employers using basic pay, as pensionable earnings will be required to increase from paying 2% to 3% of employees’ basic pay with employee contributions increasing from 1% to 3%.

Pension Regulator website

What if employees don’t want to increase contributions?

How many employees will opt out after the increases?

Therefore, it is essential that employers do not underestimate the cost of this and budget accordingly.

What should an employer do to prepare?

It is important that employers communicate the increases to employees to ensure they are aware of and understand the changes. This will make certain there are no surprises when staff see an increased deduction from their pay.