It’s fair to say that auto-enrolment, the Government’s workplace pension scheme, has been a big success since its introduction back in October 2012.
Six-and-a-half years have now passed, since when more than 10 million employees have been automatically enrolled into workplace pensions.
That figure is rising with the number of people in employment hitting an all-time high of 75.8% at the start of 2019.
But that’s not the only thing increasing, as minimum contributions – for both employees and employers – rise from 1 April 2019.
What employers need to know about auto-enrolment
If you run a business and have employees on your payroll who earn more than £10,000 a year, and are aged between 22 and state pension age, this affects you.
The next time you or your accountant runs payroll, for April 2019, your minimum contributions towards a worker’s pension will increase from 2% to 3%.
This only applies to an employee’s qualifying earnings, which means the first £6,136 – and anything over £50,000 – does not count for auto-enrolment in 2019/20.
What employees need to know about auto-enrolment
If you’re in full-time employment and meet the aforementioned criteria, your minimum contributions may be going up, too.
With immediate effect, an extra 2% of your qualifying earnings will be diverted into your workplace pension.
This brings your total minimum contribution into your workplace pension to 5%, although you can contribute more than this.
So if you only make the minimum contribution, you will see a 2% reduction in your take-home pay this month.
Are more auto-enrolment increases in the pipeline?
At the time of writing, there are no further increases to minimum contributions planned through auto-enrolment.
However, research from the Association of Consulting Actuaries found most employers back a minimum contributions applying to all earnings from 2021.
This would remove the qualifying earnings threshold, and see both employees and employers put 4% each of an employee’s salary (8% total) into a workplace pension.
Despite this increase marking the final change in this phase of auto-enrolment, staying on top of changing legislation takes its toll.
You can outsource your payroll to our in-house experts, enabling you to spend more time and resources on running your business.
We offer a comprehensive payroll service, which includes administration of workplace pension schemes as one of several tried and trusted features.
Our team of accountants can take payroll off your hands. For more information, email us on firstname.lastname@example.org or call us on 01363 773191.