AE contribution rates are on the up
Auto-enrolment (AE) has been widely seen as a great success in its first five years, with over 8 million having been enrolled into a workplace pension so far. Despite this achievement, the initiative still faces a number of obstacles in the upcoming years.
One of the biggest challenges is that contribution rates are set to rise from next month. Here’s some more information about how it’ll affect you and your staff:
When do the increases take effect?
Minimum contributions are increasing in two phases. The first increase must be in place from 6th April 2018 and the second from 6th April 2019. So there really isn’t long to get your plans in place for the contributions increase!
What are the increases?
The amount you and your staff pay into your pension will depend on the type of scheme you have chosen and the rules of that scheme. You can find this information in the scheme documents or by contacting your Aspira Corporate Adviser. Here’s a breakdown of the increases:
*Tier 1 - Pensionable pay = basic pay (excludes overtime, bonuses and other variable or non-basic elements).
Tier 2 - Pensionable pay = 85%+ of total earnings.
Tier 3 - Pensionable pay = total earnings (all pay providing that all earnings are pensionable).
Tier 4 - Qualifying earnings (Earnings between £6,032 and £46,350 for 2018/19 tax year).
Who does this apply to?
All employers with staff in a pension scheme for auto-enrolment must take action to make sure minimum amounts are being paid into the pension scheme. This is true whether you set up the scheme specifically for AE or whether it was an existing scheme. You don’t need to take any action if you don’t have any eligible workers in a pension scheme for AE or if you’re paying above the increased minimum amounts.
From 2018, employees will see their contributions triple from 1% to 3% of their salary in 2018 and then again to 5% in 2019. Concerns are that the increasing contributions could lead to thousands of people ‘opting out’ and going back to square one, therefore it is more important than ever that we keep people engaged in saving and educating them about the importance of saving for retirement. For more information please contact your Aspira Corporate Adviser or our office on 0800 048 0150.
The Financial Conduct Authority does not regulate some forms of auto-enrolment.
 Auto-enrolment 5 years on, thehrdirector.com, viewed on 24th October 2017
 AE Factsheet 4 – Contributions & Phasing, Aspira WebsiteBack To List