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Minimum pension contributions are set to increase from 6 April 2019.
Minimum pension contributions are set to increase from 6 April 2019. Employers with a UK workforce will need to determine whether the increase applies to any of their employees and prepare for amended contribution calculations by liaising with their employee benefits and payroll providers. Employers will also need to communicate this increase to eligible employees.
There must be an agreement in place for workers to at least make up any difference between the minimum employer amount and the total contribution required. The regulatory minimum level of pension contributions is based on Qualifying Earnings, which includes base salary, commissions, overtime, bonuses and some statutory payments. Contributions are payable on earnings between the lower threshold of £6,136 and the higher threshold of £50,000 (for the 2019/2020 tax year). The levels are as follows:
6 April 2019 onwards
There are alternative ways to ensure that the pension meets the legal requirements, also referred to as “Certification”. The most common options are as follows:
Option 1: Set 1
Pensionable pay must be at least basic pay but does not need to include pay such as bonuses, overtime and commission. We find this option to be the most common across our client base and is good for the attraction and retention of employees.
Option 2: Set 2
Pensionable pay must constitute at least 85% of all gross earnings. The ratio of pensionable pay to gross earnings can be calculated at an average level across the group.
Option 3: Set 3
Pensionable pay is equal to total earnings.
F&L's Employee Benefits Team can provide guidance for employers on dealing with the increase including how to advise employees of the change.
Contact us if you would like help with any aspect of auto-enrolment.