Research published recently by The Pensions Regulator shows that the vast majority of staff are continuing to save more into their pension following the increases in pensions contributions in April last year.
The on-going duties survey of employers showed less than 2% of staff in medium, small and micro businesses asked to leave their workplace pension as a result of the increase in contributions.
The survey also showed 47% of medium sized businesses are paying at least some or all of their staff more than the minimum employer contribution, with 25% and 22% of small and micro employers respectively paying more than the automatic enrolment minimum.
In April this year, the minimum pensions contributions will increase again from 5% total to 8%. Increasing contributions should be a straightforward task for your clients to do but there are a number of checks they need to make and we encourage them to start in good time. TPR has information alerting employers to what they need to do.
While it’s not a legal duty to tell staff about the increase, we encourage employers to have the information they need about their staff’s workplace pension and how it is changing. Our research shows most employers told their staff about the increases last year and when asked by their workers about workplace pensions, they felt they had the information they needed.
The vast majority of employers are successfully meeting their automatic enrolment duties and it’s now business as usual for them. Automatic enrolment is creating a new savings culture and the increase in contributions is an important part of the policy to boost retirement outcomes.
We know most employers want to do the right thing for their staff and The Pensions Regulator is there to help. However they will take action if an employer is not meeting their responsibilities. Failing to make and maintain the correct pensions contributions could result in a fine or court action.
It is not enough to just comply with automatic enrolment laws by putting staff into a scheme. Employers must also meet their duties to contribute into their employees’ pensions every month and they must ensure they are paying in at least the minimum. Pension providers have a duty to tell The Pensions Regulator if an employer is not maintaining the correct contrbutions and staff can also use our anonymous whistleblowing service if they are concerned the correct payments are not being made.
Three things for employers to check:
* Will their payroll deduct the increases?
While many payroll providers may automate their software so contributions are increased automatically, employers should check if their payroll software will do this. Their payroll should be ready to deduct the increased contributions when they rise in April 2019
* Is their pension scheme making the changes needed to support the increases?
Employers should also check their pension scheme is making necessary changes to support the increases and ensure they are continuing to use a qualifying scheme and the right amount of pension contributions are deducted. If an employer’s chosen pension scheme doesn’t support the increases, then they will need to talk to them about their options.
* What are they currently contributing? They may not need to take action
Employers and their staff can also choose to pay in more than the minimum contributions if they want to and employers who are already paying above the increased total minimum amounts need not take any further action.
The amounts that employers and workers will be required to pay into workplace pensions are due to increase from 6 April unless the worker opts out. The new limits will be 5% from the worker and 3% from the employer. The total minimum contribution will therefore increase from the current 5% overall to 8%.
In some schemes, your employer has the option to pay in more than the legal minimum. In these schemes, you can pay in less as long as your employer puts in enough to meet the total minimum contribution of 8%.
* Guidance for business advisers: www.tpr.gov.uk/phase
* Guidance for employers including a letter template to tell staff about the changes: www.tpr.gov.uk/increase
* For information relating to specific scheme rules, contact the pension scheme provider.