Employers; further changes to workplace pensions

A workplace pension is a way of saving for your retirement that’s arranged by your employer. Here are some key changes employers should be aware of.

Auto-enrolment recap

Since early 2018 all employers are obligated to include eligible staff in a workplace pension scheme. Eligibility criteria for staff to be enrolled into a workplace pension scheme are that they must be between 22 and state pension age and earn more than £192 per week. Once staff are enrolled the employer and employee must make minimum contributions into the scheme. This minimum amount is set to increase significantly from April 2019.

Employer’s responsibility

Ensuring the increase is correctly put into effect is the responsibility of an employer and The Pensions Regulator (TPR) can fine you if you get it wrong.

How much?

From 6 April 2019 the minimum total pension contribution rises from 5% to 8% of employees’ earnings – not all earnings necessarily have to be subject to AE. Of this you must pay 3% (up from 2%) and your workers must pay the difference between your contributions and the 8% (or higher figure) or tell you in writing that they don’t want to be included in your pension scheme.

Keeping workers informed

Now is the right time to inform all employees of the rate change from April 2019. We have a template letter, which can be adapted to meet your needs and send to all eligible staff. Simply contact us to receive it.

Dos and don’ts – AE safeguards

All employers have certain duties with regards to AE. You must be careful that it doesn’t look as if you’re encouraging your staff to drop out. TPR will see this as a breach of the safeguarding rules and hit you with a stiff fine.

For example, staff may not be happy about the higher AE rates and may be entitled to reduce their contributions below the minimum AE rate rather than drop out of the pension scheme altogether. Refer to your pension policy/contract or administrator to see if you can reduce your contributions accordingly.

AJN Accountants are specialists in helping contractors, freelancers and small businesses to save tax and time.

Please contact us for more information:

E: info@ajnaccountants.co.uk
T: 020 3866 8951

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