Are you running a business or considering starting a new venture? Have you hired employees or are in the hiring process? If yes, then as an employer you need to be up-to-speed with the all workplace pension duties. This includes the fresh rollout of enrolment changes all set to hit employers in 2018, in the UK.
Over the next few weeks and months, there will undoubtedly be questions raised over the correct implementation and increases in the minimum contribution. This article aims to answers many of those doubts in a simplified manner.
What is Automatic Enrolment Pension?
Automatic Enrolment Pension is a government regulation under the pensions ACT 2008; mandates all employers in the UK to enrol employees who meet the required eligibility criteria, into a workplace pension. The two categories of employees who fall under the scheme are:
- Income over £10,000 per year, or £833 per month or, £192 per week
- Employee ages between 22 to 75.
Changes to the Minimum Contribution
There are various changes to the minimum contribution towards Automatic Enrolment Pension that will impact employers and employees. The minimum contribution increases are taking effect in two phases. Beginning 6 April 2018, the first increase must be implemented, subsequently, the second phase must be implemented by 6 April 2019.
|Date||Employer contribution||Employee Contribution||Total contribution|
|06/04/18 — 05/04/19||2%||3%||5%|
Note: The above calculation is based on income between £5,876 - £45,000/ year or, £490 to £3,750/ month, or £113 to £866/ week.
Preparing for The Changes To Minimum Pension Contribution
Implementing changes on the given dates is a fairly straightforward process. Nonetheless, there are a few essential elements to be aware of.
- Set your payroll deduction in order before the 6 April 2018.
- Communicate changes to all employees regarding the changes in their increased pension amount. This should have ideally been done at the time of employment; when employers generally communicate changes regarding contributions increasing over time.
- Ensure that you are on a qualifying scheme; this information will be available to you on the information provided in the scheme document provided by your pension provider.
- Ensure that the right pension amount in being deducted by the pension provider.
Note: For any reason, if your pension scheme does not support the increases, its important to speak to your pension provider for more clarity.
Preparing early is key. (If you are unable to prepare, consult with an accountant) It’s important to be prepared early, even though the process may seem straightforward, not having the correct deduction on-time for the implementations may invite penalties. In most cases, incorrect or out of date information is the primary cause of payment failure. These issues could invite disputes between an employer and the pension provider and should be avoided. Keep your contributions intact and all your accounting up to the mark, and remember, the due date is quickly approaching.