Auto Enrolment Contribution Increases to 5% for Employees

Auto enrolment

The Pensions Regulator (TPR) is keen to make sure all businesses and individuals are prepared, as starting this month, there will be an increase to the minimum contributions that employers and their staff pay into their workplace pension scheme.

April 6th 2019 saw an increase from 2% to 3% for the minimum employer contribution, and the staff contribution has increased from 3% to 5%. The process called phasing, brings the total contribution increase to 8%, up from 5% which the pension schemes started with.

Should employers have staff in an auto enrolment pension scheme, they are required by TPR to be certain that they are at least paying the minimum amounts into their pension schemes. This is also a requirement of existing pension schemes, not just for those that are auto enrolled. This increase is not applicable to any employers who have a defined benefit pension scheme which are governed under separate rules.

The minimum contributions by the employer is now 3%, with the employee contribution defaulting to the balancing 5% as required by the rules. However, the employer can elect to pay more or even the full 8% total contributions required. This will be decision of each employer and will be defined in their pension documentation when the workplace pension has been established.

The contributions into the pension scheme is calculated for a specific range of earnings for each employee. For the 2019/20 tax year this range is between £6,136 and £50,000 a year (£512 and £4,167 a month, or £118 and £962 a week). These ranges are reviewed by the Government on an annual basis.

All calculations for the pension contributions must include salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay, and statutory adoption pay.

More information can be found at The Pensions Regulator