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Mar 2 2018 | Amy Harper

Pension contribution rate changes from April 2018 – what to know

For any business who has an automatic enrolment pension scheme in place, under the Pensions Act 2008, the minimum amounts paid in by employers and their employees will increase as planned in April this year.

If you have put your staff into a pension scheme for automatic enrolment you will need to ensure that at least the required minimum amount is paid by you and your staff into the scheme.

What are the minimum pension contribution rates?

The table below shows the minimum contributions that most employers pay and the date when they will increase. Remember there are two increases coming – the first increase is from 6 April 2018, followed by the second in 6 April 2019;

Date effective Employer minimum contribution Staff contribution Total minimum contribution
Currently until 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

Why do the minimum pension contribution rates need to change?

The workplace pension scheme was introduced by the Government through reforms in the Pensions Act 2008, to encourage and support employees to start building up retirement benefits. The increase in rates is part of the scheme to ensure that private pension pots are growing adequately.

Employers have a legal duty to make sure that the correct contribution rates are being made from April 2018, otherwise could be subject to legal action and fines from The Pensions Regulator.

Want do I need to do?

If HJS currently provide payroll services to you:

  • We will complete the necessary actions to increase your pension contributions to the required level when we complete your payroll in April.  If you are already paying the increased minimum amounts no further action will be taken.
  • You should let you staff know about any increases being applied to their contributions.

If payroll is run by yourself or another provider:

  • Get in touch with your workplace pension scheme provider
  • Be clear on which of the increases in the table above relate to your workplace pension scheme
  • Identify which staff members are affected and what contributions will have to be made.
  • Communicate with payroll to ensure any changes are set up and ready by 6 April 2018
  • Inform your employees about the new rates, giving them plenty of notice.

The Pensions Regulator has some tools you may find useful – the online calculator to help you work out minimum employer contribution amounts, and sample letter for updating your employees.

How HJS can help

If you’d like to discuss the benefits of having your payroll serviced by HJS Outsource, talk to us today on 0808 1644 222 or find out more here.