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Auto-enrolment. Times are a changing and guess what it is getting more expensive.

I don’t think that this is well known or maybe it is but I thought it would be useful to remind everybody of what is happening with auto-enrolment.

What’s happening?

By law, on 6 April 2018, you are required to increase the amount of your minimum contributions into your staff’s automatic enrolment pension to at least of 2% of qualifying earnings. Members of staff will have to pay the shortfall needed to make the total minimum contribution up to 5%, including your contribution.

The minimum contribution levels will rise again on 6 April 2019, with you as the employer paying a minimum of 3% towards the pension, and the total minimum contribution reaching 8% – with staff making up the difference.

You do not need to take any further action if you don’t have any staff in a pension scheme for automatic enrolment, or if you are already paying above the increased minimum amounts. These increases don’t apply to staff who asked to be put into a scheme that you do not have to pay into.

You can choose to pay the full amount of the total minimum contribution. This may mean that your staff do not have to pay in at all, unless the scheme’s rules say that they have to make contributions.

Both you and your staff can choose to contribute more than the minimum amounts to the pension if you both want to.

If you pay in more than your legal minimum contribution, but less than the total minimum contribution shown in the table below, then your staff will need to pay in at least enough to make up the shortfall between these amounts.

The table below shows the minimum contributions that employers who set up a defined contribution scheme for automatic enrolment must pay, and the date when they must increase. This is calculated based on earnings between £5,876 to £45,000 per year (£490 to £3,750 per month, or £113 to £866 per week), and including certain elements of pay.

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%

You may have agreed with your scheme provider to calculate minimum contributions in a different way. If this is the case you will need to apply different increases.

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