Most employers will be aware of the legal requirements to automatically enrol certain workers into a qualifying pension scheme and contribute with respect to them (and allow membership in other circumstances). Auto-enrolment is an ongoing obligation, requiring close monitoring of the workforce to ensure that, where necessary, workers are auto-enrolled at the appropriate time and indeed, if they opt out, re-enrolled every three years. It is also an evolving area, so for example, new exemptions have been introduced along the way.
The Pensions Regulator has been very active in its enforcement activity, as evidenced by its regular reports on the subject and very public criminal prosecutions, so employers should be alive to the need to ensure compliance. A link to our article in January's Law at Work (the publication produced by our Employment Team) which goes into some of these issues in more depth can be found here.
Minimum Contributions, earnings trigger and qualifying earnings bands
More immediately for employers is to ensure that any necessary payroll amendments are made to reflect the new minimum contributions rates applicable on and from 6 April 2018 which are, for defined contribution schemes:
Date effective | Employer minimum contribution (% of "qualifying earnings") | Total minimum contribution (% of "qualifying earnings") |
Currently until 5 April 2018 | 1% | 2% |
6 April 2018 to 5 April 2019 | 2% | 5% |
6 April 2019 onwards | 3% | 8% |
The auto-enrolment earnings trigger determines who is eligible to be auto-enrolled by their employer and the qualifying earnings band is the band of earnings used to calculate the minimum contribution levels for defined contribution schemes being used for auto-enrolment purposes. The lower end of the band is also relevant to who can opt-in to a scheme (where they do not earn enough to be auto-enrolled).
For the 2018/19 tax year, the earnings trigger will remain at £10,000 per year, whilst the qualifying earnings band lower and upper end points will increase to £6,032 and £46,350 per year (they were at £5,876 and £45,000 respectively for 2017/18).
The future
The conclusions from the Government's auto-enrolment review published just before Christmas suggest that any more significant changes to the regime will only apply in the longer term (see the article referred to above) but if you have queries on this or on other aspect of auto-enrolment, do let us know.
