Pensions

Upcoming changes to the pensions auto-enrolment regime

The government has decided that the earnings trigger will remain at £10,000 for the tax year 2018/19, following its annual review of the automatic enrolment earnings trigger. Whilst that is staying the same, other parts of the pensions auto-enrolment regime will change. Here’s a run-down of the key points:

  • The qualifying earnings band is set to increase. This sets minimum contribution levels for money purchase pension schemes. The minimum of the band also confirms who can opt in to a workplace pension scheme if they earn less than the earnings trigger. The earnings band will continue to be aligned with National Insurance contribution rates for tax year 2018/19.
  • This means that the lower limit of the qualifying earnings band will increase from £5,876 to £6,032 and the upper limit of the qualifying earnings band will increase from £45,000 to £46,350.
  • From 6 April 2018, employers may be required to increase the amount of their contributions into their auto-enrolment pension scheme. Workers will have to make up whatever shortfall remains of the new total minimum contribution.
  • Currently, the employer’s minimum contribution is 1%. This will increase to 2% on 6 April 2018 and then to 3% on 6 April 2019.
  • The worker’s minimum contribution is currently 1%. This will increase to 3% on 6 April 2018 and then to 5% on 6 April 2019.
  • The total minimum contribution is currently 2% but will increase to 5% on 6 April 2018 and then to 8% on 6 April 2019.

Additionally:

  • If the employer pays the same as the minimum total contribution then the worker will not need to pay any contributions, unless the scheme rules require a contribution.
  • If the employer contributes more than their required minimum amount but less than the total minimum amount, then the worker only needs to make up the shortfall between the total minimum and the employer contribution.
  • All auto-enrolment pension schemes with contribution rates that would be below the minimum amount after the rate increases must apply the higher rates to remain a qualifying scheme.

During 2017, the Government conducted a review of automatic enrolment to consider how they could encourage more people to save into a workplace pension. You can read it here.

The report sets out the government’s plans to lower the age at which employers are required to auto-enrol employees into a workplace pension scheme from age 22 to 18.

Fortunately for employers, the government intends that these changes will not take effect until the mid-2020s.

We’ll keep you updated as the changes roll out. In the meantime, you can contact Alison for expert HR advice here.

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All change… again… for pensions

Just as everyone thought they were getting to know what the plan was for Auto Enrolment and pensions, the Pension Regulator instigated changes to their system for when an employer’s duty begins. With effect from 1 October 2017, employers legal duties begin on the day their first member of staff starts work.

In plain English this means: If you become an employer for the first time on or after 1 October 2017, you will, immediately, have legal duties for that new member of staff – and they apply from the first day the member of staff started working for you. When you are about to employ someone, for the first time, you need to get ready for automatic enrolment.

The Pensions Regulator has published a good guidance note on this here. For advice on this and any other related matters you can contact Alison, as well.

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