Minimum workplace pension contributions rise
The minimum contributions employers and their staff must pay into their automatic enrolment workplace pension scheme increased with effect from 6 April 2019.
From that date, the employer minimum contribution has risen from 2% to 3%, while the staff contribution also increased from 3% to 5%. As part of the ‘phasing’ process, the increases mean that total contributions for employees have gone up from 5% to 8%.
All employers with staff in a pension scheme for automatic enrolment must ensure that they implement the changes and ensure that at least the new minimum contributions are being paid into their workplace pension scheme. This applies whether the employer set up a pension scheme for automatic enrolment or they are using an existing scheme.
The increases do not apply to employers using defined benefits pension schemes.
The amount employers and their staff pay into the 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 2019/20 tax year this range is between £6,136 and £50,000 a year (which equates to between £512 and £4,169 a month, or £118 and £962 a week).
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 specify different elements of staff pay.
It is worth reminding individuals that non-earners can still pay £2,880 a year into a pension and receive an automatic 20% boost to their contribution in tax relief. This means that on a contribution of £240 per month, the actual amount invested in the pension scheme will be £300. Further information on the increase of automatic enrolment contributions can be found here.
You should always seek advice about your specific requirements before you act. Speak to one of our experts on 0161 476 9000 or contact us here.