Auto-enrolment - Client Questions and News
A corporate client recently called us to ask whether an employee could decrease their pension contributions to less than the minimums following the April 2018 increases. The employee had read about this (known as ‘opting down’) in the press and requested for the employer to action this. We thought this might be a question facing other employers so here’s the lowdown:
Firstly ‘opting down’ does allow employees to pay a reduced contribution as an alternative to leaving the pension altogether. However, if an employee decides to do this (and the employer agrees) then the whole pension scheme no longer counts as a “qualifying scheme” for auto-enrolment purposes as the minimum contribution isn’t being made. This therefore means the employer would be in breach of auto-enrolment legislation if they don’t have an alternative “qualifying scheme” in place. Not all pension schemes allow this approach, and even if the scheme allows it, there’s no obligation for the employer to agree.
If the employer does agree to the opt down there’s no longer a requirement for any employer contribution. The opted down employee will also have to be enrolled into the qualifying scheme at the next re-enrolment date.
Employers must be extremely careful when dealing with opt down requests as any action which could be seen as encouraging staff to take this route is prohibited.
REGULATOR SPOT CHECKS IN NORTH EAST
The Pensions Regulator (TPR) has begun carrying out spot checks in the North East of England to find employers who are not complying with their pension duties. In the last month over a dozen businesses in towns and cities across the region have been visited to check that qualifying staff are being given the workplace pension they are entitled to. At the end of Feb 2018, across the North East, more than 250,000 people are now saving into a pension thanks to auto-enrolment.
HOW TAX AND NI CHANGES WILL REDUCE IMPACT OF AE INCREASES
Tax and National Insurance threshold changes will significantly reduce the impact of increased auto-enrolment contributions that took effect last week, according to a Pensions Policy Institute paper. Here’s an example of how it’ll impact on the weekly take home of someone earning £15,000 a year:
Higher earners are proportionally more impacted by the increase in pension contributions as a smaller proportion of a lower-paid employee’s earnings are included in the band earnings so a lower proportion of their salary is affected by the increase. For example somebody earning £25,000 a week will take home £3.86 less a week.
If you have any further questions on the above please contact your Aspira Corporate Adviser or call the office on 0800 048 0150.
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