We all love change don’t we… Well payroll is the gift that keeps on giving. One of those changes is pension contributions! From April 2019 minimum pension contributions are increasing.
Under auto-enrolment rules employee contributions will increase from 3% to 5% and employers’ contributions will increase from 2% to 3%. Rules only apply to auto-enrolment pension schemes.
This applies to all employers, not just if you are setting up a new auto-enrolment pension scheme. This will not affect an employer or employees that are already paying above the minimum amount (3% for employers and 5% for employees). Should an employer choose to pay the minimum contribution (8%) in full towards their employee’s pension scheme, then the worker would not have to contribute.
We all want to retire, right? It is the government’s view that everybody should be contributing into a workplace pension. The aim is to advance pension savings in the UK to allow us all to be able to support ourselves and have a sustainable income in our retirement (I can’t wait!).
Payroll Penny’s Top Tips;
• Plan in advance. Remember, failing to plan is planning to fail. Ensure that your payroll software is able to support the increase in contributions, as a failure to do so is not only non-compliant but also illegal and could lead to fines from the pension regulator.
• Inform workers. Although there is no legal obligation to do this, this should decrease queries and also reduce the number of workers that leave the scheme as a result of the increase.
• Deduct the correct amount. Sounds obvious, but you’d be amazed how many people forget to do this. If April 6th falls part way through a pay period, check with your pension provider that they allow part period, or if you can default it to increase contributions in a full pay period. If this is not possible, ensure that if 6th April is part way through a pay period, that all pension contributions prior to this are deducted at the old rate and all contributions after are deducted at the new rate.
Are pensions keeping you up at night? They don’t have to, let us take the weight off and get in touch for a free, no obligations quote.