Auto enrolment contribution increases to 5% for employees
26 Mar 2019
From next month, the minimum contributions employers and their staff must pay into their automatic enrolment workplace pension scheme will increase, and The Pensions Regulator (TPR) is urging all businesses and individuals to make sure they are ready for the change
26 Mar 2019
From 6 April 2019 the employer minimum contribution will rise from 2% to 3%, while the staff contribution increases from 3% to 5%. This means the total contribution overall goes up from 5% to 8%, in a process known as phasing.
TPR says 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 whether they set up a pension scheme for automatic enrolment or they decided to use an existing scheme.
For employers using a defined benefits pension scheme the increases do not apply.
TPR advises that the amount employers and their staff pay into their pension scheme will vary depending on the type of scheme they have chosen and the rules of that scheme. Staff contributions may also vary depending on the type of tax relief applied by the scheme.
Most employers use pension schemes that from April 2019 will require a total minimum of 8% 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). These figures are reviewed each year by the government.
Employers calculating contributions for this type of scheme should include salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay, and statutory adoption pay, although some schemes may specific different element of staff pay.
LEBC Group, a national firm of financial advisers, is starting a marketing push to encourage full-time mothers to be auto enrolled into their own pension plan, so that continuity of savings can place them in a better position at retirement. The firm says this would help to narrow the gender pension gap and enable these women to claim their share of the tax relief available for pension savings.
Kay Ingram, director of public policy at LEBC, said: ‘Many of the women we speak to have no idea that as non-earners they can still pay into pensions and receive an automatic 20% boost to their savings in tax relief.
‘We encourage more women to continue saving for retirement and recommend that they earmark part of the family budget to this end.’
Report by Pat Sweet