Auto Enrolment Increases

One million UK employers have enrolled staff into a workplace pension, helping more than 9 million employees save towards a more financially secure retirement.

If you have been automatically enrolled in your employer’s workplace pension scheme, you may be in for surprise from today. The start of the new tax year will see workers minimum contributions into auto-enrolment pensions triple from 1% to 3%

Under automatic enrolment, minimum pension contributions are required to increase over time. This happens on specific dates and will have been advised when you, as a member of staff when you were automatically enrolled. There are no additional duties for employers to advise members about the increases.

Minimum contribution increases

Auto-enrolment pensions began with modest contributions: 1% from the employee – including tax relief – an 1% from the employer. To afford a decent retirement, the government has always said that rates need to rise. The table below demonstrates the phases of contribution increases, with the employer paying only their minimum, and the staff contribution.

Auto enrollment pension contribution table

Source: The Pensions Regulator

By law, on 6th April, employers must have increased the amount of their minimum contributions into their staff’s automatic enrolment pension to at least 2% of qualifying earnings, with the employee contributing 3%. Both the employer and staff member can choose to contribute greater amounts to the pension if they wish. From April next year, the rates will rise again: 5% from the employee, and 3% from the employer.

Can I opt out?

Workers have three choices:
• Continue paying in at the new higher rate
• Opt out of a pension altogether
• Opt to continue paying in at the old rate

The last option is known as ‘opting down’. As far as the rules are concerned, this means that your employer is no longer obliged to make any contribution at all.

Source: The Pensions Regulator/BBC News 5/4/18