Pension Auto-Enrolment Increases

07/03/2018

Auto-enrolment was introduced by the government to encourage employees to save more for their future in a workplace pension scheme.

To enjoy a comfortable retirement, employees will need more than just the State Pension.  For an employee, active membership of an auto-enrolment scheme with their employer is a great way to increase their pension savings.

Employers with an auto-enrolment scheme must ensure the contributions payable meet the minimum contribution requirements. The minimum contributions to be paid to a qualifying workplace pension scheme are increasing in two stages – this is known as phasing.

The minimum contribution rates will increase on 6 April 2018 and 6 April 2019.

It’s the responsibility of the employer to understand what this means and to take action to ensure the minimum contribution requirements are met.

The table below identifies the minimum contribution rates that apply to qualifying workplace pension schemes.

Earnings set
Earnings definition
Minimum contribution to 5 April 2018
Minimum contribution 6 April 2018 to 5 April 2019
Minimum contribution 6 April 2019 onwards
Qualifying  earnings
Based on all earnings, deducting the lower earnings threshold and capped at the upper earnings threshold.
2% at least 1% of which must be the employer’s contribution.
5% at least 2% of which must be the employer’s contribution.
8% at least 3% of which must be the employer’s contribution.
Set 1
Based on pensionable earnings which must be at least equal to the employee’s basic pay.
3% at least 2% of which must be the employer’s contribution.
6% at least 3% of which must be the employer’s contribution.
9% at least 4% of which must be the employer’s contribution.
Set 2
Based on pensionable earnings which must be at least equal to the employee’s basic pay. This set can only be used if the combined total pensionable earnings of all employees in the group is at least 85% of their combined total earnings.
2% at least 1% of which must be the employer’s contribution.
5% at least 2% of which must be the employer’s contribution.
8% at least 3% of which must be the employer’s contribution.
Set 3
Based on all earnings.
2% at least 1% of which must be the employer’s contribution.
5% at least 2% of which must be the employer’s contribution.
7% at least 3% of which must be the employer’s contribution.
  • An employer can agree to pay more than the employer minimum contribution, but can’t pay less than this.
  • The employee must be required to pay any difference between the employer contribution and the total minimum.
  • Employers and employees can arrange to pay more than the minimums.

 

If you would like more information, please contact us >>

Written by Fiona Ruck | Financial Adviser

Fiona joined Mantle FInancial Planning in September 2013 Read more >>

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