Workplace Pensions – Minimum Contribution Increase

13th February 2018 Nicky Cole
Workplace Pensions – Minimum Contribution Increase

From 6 April 2018, all employers will be required to increase their contributions into their automatic enrolment pension. Staff members will have to make up whatever shortfall remains of the new total minimum contribution.

From April 2018, the new minimum overall contribution is 5%.  This is made up of an employer contribution of 2% and an employee contribution of 3% (currently the overall contribution is 2% with both employers and employees contributing 1%, so this is a significant increase).

If the employer pays the same as the minimum total contribution then the member of staff will not need to pay any contributions, unless the scheme rules require a contribution.

Both the employer and staff member can choose to contribute greater amounts to the pension if they wish.

If the employer contributes more than their required minimum amount – but less than the total minimum amount – then the staff member only needs to make up the shortfall between the total minimum and the employer contribution.

The table below demonstrates the phases of contribution increases, with the employer paying only their minimum, and the staff contribution shown in brackets (the difference between the total minimum and the employer minimum), as you can see, contributions will rise again in 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%

If Mad About Bookkeeping look after your auto-enrolment and pension contributions, through your payroll, then this is just for your information, as we will increase your contributions automatically through your payroll.

However, please ensure that your staff are reminded that their contributions will also be increased to 3% from April 2018.  Again, for those of you who run your payrolls through Mad About Bookkeeping, this will be automatically increased for you.

If you have not yet arranged your workplace pension and are not sure how to go about it, please don’t hesitate to contact us, we’re here to help.