Auto Enrolment Contribution Rates

By law, on 6 April 2018, Employers are required to increase the amount of their minimum auto enrolment contributions into their staff’s automatic enrolment pension to at least of 2% of qualifying earnings. Members of staff will have to pay the shortfall needed to make the total minimum contribution up to 5%, therefore their minimum contribution is 3%.

The minimum auto enrollment contribution levels will rise again on 6 April 2019, with the employer paying a minimum of 3% towards the pension, and the total minimum contribution reaching 8% – with staff making up the difference of 5%.

You as the employer can choose to pay the full amount of the total minimum contribution. This may mean staff do not have to pay in anything at all, unless the scheme’s rules say that they have to make contributions.

Both yourself and staff can also choose to contribute more than the minimum amounts if you wish.

If you pay in more than their legal minimum contribution, but less than the total minimum contribution shown in the table below, then your staff will need to pay in at least enough to make up the shortfall between these amounts.

The table below shows the minimum contributions that employers who set up a defined contribution scheme for automatic enrolment must pay, and the date when they must increase. This is calculated based on earnings between £5,876 to £45,000 per year (£490 to £3,750 per month, or £113 to £866 per week), and including certain elements of pay.

 

Date effective Employer minimum contribution Staff contribution Total minimum contribution
Currently until 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

 

It’s important that your payroll is ready to deduct the increased minimum contributions when they rise on 6 April 2018 and 6 April 2019 and knows when and how much to deduct.

If you use an outsourced payroll service, you should check with them that they’re ready for the increases, and make sure they know when to deduct them.

For payroll processed in-house, you need to be certain that the software is ready for these increases. In order to avoid any problems, you should make sure that the contributions increases have been put in place correctly, including for the first payroll run where the new rates may take effect part way through the pay period.

 

Crunchers – Accountants Edinburgh

© Photo Credit Garry Knight

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