Contributions to increase

Posted on Mar 07, 2018

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If you’re an employer that has already set up a Workplace Pension Scheme for your staff, then you need to be aware that the minimum contributions are increasing from next month (April 2018).

Auto-enrolment of staff in workplace pension schemes now applies to even the smallest of companies, employing just one person, although there are exclusions. It’s important to understand the minimum amounts you need to contribute and this will vary depending on the scheme’s definition of pensionable pay. 

Whatever the definition that has been chosen, there will be an increase in contributions for both the employer and employee from 6 April 2018. Therefore, not only, as an employer, will you need to find the additional funds, but you’ll also need to pre-warn your employees that their take- home pay will be slightly lower than the previous month.

Next year, from 6 April 2019, contributions will once again have to increase for both the employer and employee.

All employers are expected to provide a Workplace Pension Scheme under a system called ‘automatic (or auto) enrolment’. It was introduced because we can no longer solely rely on the State pension, which is moving to a flat rate, to meet our needs in retirement. The population is ageing which means we will spend longer in retirement and we now must wait longer before being entitled to receive the State pension. Auto-enrolment is intended to encourage people to think about saving for their retirement, while still at work.

As an employer you should automatically enrol employees into a pension scheme if the following apply:

  • Your employee is classed as a ‘worker’.
  • They are aged between 22 and State Pension age.
  • They earn at least £10,000 per year.
  • They usually work in the UK.

Each employer with one employee or more is required by law to set up a Workplace Pension Scheme for their staff from a specified date. The specified date is known as their Staging Date and is allocated to each employer by The Pensions Regulator (TPR) and confirmed in a letter (or you can look online to find it out). By April 2019, all eligible workers will need to be automatically enrolled into a Workplace Pension Scheme.

Although at first glance, this would appear to be simply about setting up and running a pension scheme, there are challenges for employers:

  • Understanding the complexity of the Workplace Pension Scheme regulations.
  • Changing their monthly payroll process to incorporate a Workplace Pension Scheme.
  • Clearly communicating to staff what is going to happen and why.

Over the past three years, our Employee Benefits team at The Goodman Partnership has set up more than 30 Workplace Pension Schemes for local and national businesses, including architects, car leasing firms, charities, consulting engineers, dentists, house builders, lawyers, PR companies and private schools.  We have also been appointed to review and take-over existing Workplace Pension arrangements. We can also provide continuing scheme governance, which is now more important than ever, as The Pensions Regulator requires employers to make sure that their Workplace Pension Scheme is set up effectively, monitored regularly and delivers good outcomes for members.

At The Goodman Partnership, we offer a simplified proposition that will help an employer to create a suitable specification for their scheme, taking into account the options available and recommend and implement a scheme with a suitable provider.

If you are responsible for setting up your Workplace Pension Scheme, call Graham Rose at The Goodman Partnership on tel: 01892 500623 or email: graham@goodmanemployeebenefits.co.uk or click here: Goodman Employee Benefits.

 


Goodman Chartered Financial Planners is a trading name of Fairstone Financial Management Ltd. Fairstone Financial Management Ltd., is authorised and regulated by the Financial Conduct Authority – FRN: 475973 Registered in England and Wales no: 05574120. Part of the Fairstone Group. Where you have a complaint or dispute with us and we are unable to resolve this to your satisfaction then we are obliged to offer you the Financial Ombudsman Service to help resolve this. Please see the following link for further details: www.financial-ombudsman.org.uk.