It’s reasonable to suggest that auto enrolment has been a major success story. In fact, more than 1 million employers and 9 million employees have made pension saving a part of everyday life since its introduction in 2012.

6 April 2018 saw the second phase in the development of auto-enrolment; when employer and employee minimum contributions rates for defined contribution qualifying schemes will increase (and do so again on 6 April 2019).

Are you ready?

If you’re an employer, you should have received a letter from The Pensions Regulator advising you of your duty to increase contributions. However, this isn’t necessarily a simple exercise as the minimum level of contribution depends on the rules of the scheme and the definition of pay used to calculate the contributions.

The table below illustrates the different definitions of pensionable pay and the respective minimum levels of contributions:

 

 Date effectiveTo 5 April 20186 April 2018 to 5 April 2019From 6 April 2019
Qualifying Band Earnings or Own definition (at least to basic pay and 85% total pay, please see below)Employer1%2%3%
Employee1%3%5%
Total minimum2%5%8%
Basic pay (Does not include  bonuses, overtime shift pay or

relocation allowances)

Employer2%3%4%
Employee1%3%5%
Total minimum3%6%9%
Total pay (Includes all elements of pay and earnings)Employer1%2%3%
Employee1%3%4%
Total minimum2%5%7%

 

If you’d like help understanding your auto-enrollment duties or you’d like to consider outsourcing your responsibilities to a specialist, please get in touch.

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