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Employer pension contributions set to increase in April 2018

Article posted: 21st November 2017

Changes to pensions continue and from 6 April 2018, employers will be required to increase the amount of their contributions into their employees’ automatic enrolment pension scheme. Employees own contributions will also increase.

Under the Pensions Act 2008, every employer in the UK with at least one employee must put certain staff into a pension scheme and contribute towards it. All employers that were in business prior to 30 September 2017 had a staged approach to auto-enrolment. However, since 1 October 2017, all new businesses have had to introduce a pension scheme immediately within the minimum 2% contribution level (usually split 1% employer and 1% employee).

The contribution levels continue to rise until the employer is paying a minimum of 3% towards the pension and the total contribution reaches at least 8% - with the employee making up the rest.

If the employer chooses to pay the total contribution, then the employee will not need to pay any contributions, unless the scheme rules require one.

Both the employer and employee can choose to contribute greater amounts to the pension.

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

McBrides Staff Partner Tanya Hamilton says: “It is important that employers keep up to date with their pension obligations, particularly as punitive fines are being threatened for those that do not get this right.

“There is plenty of information out there to help and the key is keeping up-to-date with changes and not being afraid to check-in with your adviser or the Pensions Regulator to make sure you are correctly providing a scheme to your employees.”

The table below demonstrates the phasing 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).

Date effective Employer minimum contribution      Total minimum contribution
Currently until 5/4/2018       1% 2% (including 1% staff contribution)
6/4/18 – 5/4/2019 2% 5% (including 3% staff contribution)
6/4/2019 3%  8% (including 5% staff contribution)  


Further details about auto-enrolment can be found at: http://www.thepensionsregulator.gov.uk/en/employers.

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