Employer auto enrolment pension contribution set to double with effect from 6th April 2018
15th March 2018
All employers and employees currently paying the minimum contribution of 1% will have to factor contribution increases into their cashflow in order to meet the rise in the level of auto enrolment funding.
From 6 April 2018 to 5 April 2019, the employer minimum contribution will increase to 2% with staff contribution equalling 3%. This will rise again in the year to 5th April 2020.
The contribution levels continue to rise until the employer is paying a minimum of 3% towards the pension and the total minimum contribution reaches 8% – with the member of staff making up the balance.
If the employer pays the total minimum contribution the staff member will not need to pay any contributions unless the scheme rules require a contribution.
Both the employer and staff member can choose to contribute a higher amount to the pension if they wish.
If the employer contributes more than their required minimum amount – but less than the total minimum amount – then the staff member only needs to make up the shortfall between the total minimum and the employer contribution.
The table below shows the phases of contribution increases with the employer paying only their minimum and the staff contribution being the difference between the total minimum and the employer minimum:
Date Er minimum contribution Ee contribution Total minimum contribution
Until 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%
Automatic enrolment pension schemes with contribution rates below the minimum amount (after the rate increases) must apply the higher rates in order to remain a qualifying scheme.
Disclaimer - All information in this post was correct at time of writing.
