Pensions

Pension payments increase for employers and employees

Auto-enrolment pensions will further increase from 3% to 5% for employee contributions and from 2% to 3% for employers.

Although potentially this means a higher retirement income for employees, it could spell trouble for some as it may mean a decrease in take-home pay.

In the tax year 2017/2018 the auto-enrolment contribution rate was an equal 1% for the employer and 1% for the employee. This increased to 3% for the employee and 2% for the employer in the tax year 2018/2019. The next tax year will see the total auto enrolment contribution rates rocket to 8%.

The government has been planning this move for a while, as it claims rates needs to rise to meet the costs of a decent retirement.

Employees now have three options:

  • Opting down: Employers aren’t required to make a contribution but tax relief is still available
  • Pay the new higher rate: Increasing to 8% total next tax year
  • Opt-out: Choose not to pay into the pension

For example, an employee with a salary of £27,000 who agrees to pay the new rate next year, will see their pension contributions increase from £810 per year to £1350 per year, while the employer contribution increases from £540 to £810 per year.

Need some expert advice on auto enrolment pension contributions? Contact Alison via email for more information.

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Important amendments to payslips

Getting your payslips right, and making sure all the right information is on them, is an essential task for any employer. Making sure your payslips are up to standard is going to be even more important from 6 April 2018, when important changes to the legislation on payslips.

 

First of all, let’s take a look at how things stand currently.

There are penalties if employers fail to supply an employee with a copy of a payslip. If they don’t, the employment tribunal can order the employer to reimburse the employee with the full amount of any unauthorised deductions made in the 13 weeks preceding the application. That’s a hefty price to pay for not getting your house in order.

Under the Employment Rights Act 1996, employees have certain rights when it comes to their payslips. Under UK legislation, payslips must contain particular information. This includes:

  • The date of payment;
  • The gross amount of the wages or salary;
  • The net amount of wages or salary payable;
  • The amount and payment method of each part-payment, where different parts of the net amount are paid in different ways;
  • Method of payment (e.g. BACS transfer);
  • The amounts of any variable or fixed deductions from the gross amount and the reason they are made (e.g. National Insurance, tax, contractual deductions such as insurance etc.)

Whilst traditionally payslips have been paper statements many employers now supply them electronically, and HMRC guidance says that a payslip ‘can be in either paper or electronic format’.

 

So what amendments to the Employment Rights Act 1996 should employers be preparing for?

The important point concerns wages or salaries that vary by reference to time worked. Where this is the case, the total hours worked in respect of the variable amount of wages or salary must be shown, either as:

  • a single total figure, or
  • separate figures for different types of work or different rates of pay.

The change is set to come into force very soon, so employers need to update the information on their payslips ASAP.

For expert, plain-English advice on the legislation surrounding payslips, you can contact Alison here.

 

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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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