Auto-enrolment contributions going up on 6 April

3 Apr 2019

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Saffery Champness is recommending employers advise their staff that auto-enrolment pension contributions go up from 6 April 2019.

This change sees the minimum contributions employers and employees pay into defined contribution automatic enrolment workplace pension schemes increasing from 2% to 3% for employers and from 3% to 5% for staff contributions. Total minimum contributions overall therefore increase from 5% to 8%.

The Pensions Regulator (TPR) has advised that the increase in the minimum contributions applies whether a new auto-enrolment scheme was specifically set up or whether an old scheme was adopted for the purpose of auto-enrolment. These changes do not affect defined benefit pension schemes.

TPR is also advising employers that qualifying earnings include salary, wages, overtime, bonuses, commissions, statutory sick pay, and statutory maternity/paternity/adoption pay in calculating the required contributions.

Martyn Dobinson, a partner at Saffery Champness in Manchester, says:

“Whilst there is no legal obligation on employers to write to those in their auto-enrolment scheme notifying these changes, clearly with a further percentage going into pension contributions this could mean a decrease in take home pay for some members of staff where they may not have had a pay rise in the last 12 months. They will however stand to benefit from higher incomes in retirement.

“For those currently paying at the auto-enrolment minimum rate and on an average salary of £27,000, employee contributions will increase from around £500 to £800 per annum from 6 April 2019.”