What you need to know about the Auto-Enrolment Pension increase

Automatic enrolment into a pension scheme is a legal duty of every employer operating in the UK as part of the Pensions Act 2008.

When the process was implemented, it stated that the minimum contribution from both employers and employees would increase over time; this is what we are seeing with the dawn of a new tax year. From 6th April 2018, employers may be required to increase the amount they’re contributing towards their automatic enrolment pension.

Currently, the minimum total contribution stands at 2% of qualifying earning, but this will be increasing to 5% and will continue to increase to 8% during the next tax year. This is broken down by employers contributing a minimum of 2% and staff contributing 3% to get the total minimum contribution of 5%.

To help you understand the way these contributions operate, take a look at the below points:

  • If you as an employer choose to pay the same as the minimum total contribution – in this case 5% – your employees will not need to pay towards their pensions, unless the scheme rules require a contribution from them.
  • If you choose to contribute more than 2%, but less than 5%, your employees will need to make up the remainder.
  • Both you and your employees can choose to contribute greater amounts to the pension if desired.

It’s important that you follow the rules set out for the automatic enrolment pensions, not only so you stay compliant with the law, but also so you’re meeting the needs of your employees. Keeping the pension process as seamless as possible will show that you’re willing to do what’s best for your team, as well as helping to keep them motivated and working at their maximum efficiency.

At KMS Payroll, we’re here to help you understand more about the auto-enrolment process and all of the intricate details that come with a pension scheme, as well as helping you to find the perfect one to suit your business’ needs. Get in touch today to find out more about how we can help.