From April 2019, the minimum contribution rates for workplace pensions are set to rise.
As an employer, this should form a part of your business planning over the next year, by making sure your business is ready for the increase, as well as letting your employees know what’s changing.
Whether you’re a new employer or have been running a workplace pension for years, here’s a recap of what you need to do now and the changes you’ll need to make in the future.
Under auto-enrolment, you’re required to enrol all eligible employees into a workplace pension scheme, and to provide contributions at a percentage of their qualifying earnings.
Employees are eligible if they’re aged between 22 and state pension age and earn at least £10,000 a year.
It’s not compulsory to stay in the scheme, and employees can choose to opt out – but you cannot encourage them to do so.
Changes in 2019
The minimum contribution employers must make towards an eligible employee’s workplace pension scheme is rising to 3% in April 2019.
At the same time, employee contributions will rise to 5%.
This is part of a series of planned increases that were put in place when auto-enrolment began. Minimum contributions have gradually risen over the following stages:
|Tax year||Employer contribution||Employee contribution||Total contribution|
At the moment, no further increases have been set.
Preparing for the increase
There are a few things you can do to ensure your business is ready to adapt to the change to workplace pensions.
Let your staff know
It’s a good idea to keep your employees informed about the increase in their contributions, and why it’s happening.
It isn’t a legal obligation to notify them, as your staff will have received a letter about the scheme when they were first enrolled.
However, doing so may help to decrease the number of queries you get, and prevent employees from opting out when their contributions increase.
Your pension scheme may be able to offer some support with communications to staff.
Assess the impact on business costs
The cost to your business will depend on how many employees you have and what their salaries are, but you can expect to pay 1% more than the current minimum.
Calculating the effect this might have on your business will help you to balance it against your other costs.
Speak to us
We’ll help you get your business ready for the changes to workplace pensions, and we can offer any support you need along the way.
Get in touch to talk about how we can help with your workplace pension.